7CFR Part 250 Food Distribution

SUBCHAPTER B—GENERAL REGULATIONS AND POLICIES—
FOOD DISTRIBUTION
PART 250—DONATION OF FOODS
FOR USE IN THE UNITED STATES,
ITS TERRITORIES AND POSSESSIONS AND AREAS UNDER ITS JURISDICTION
Subpart A—General
Sec.
250.1
250.2
250.3

Subpart F—Household Programs
General purpose and scope.
Administration.
Definitions.

Subpart B—General Operating Provisions
250.10 Eligible distributing and subdistributing agencies.
250.11 Eligibility determination for recipient agencies and recipients.
250.12 Agreements.
250.13 Distribution and control of donated
foods.
250.14 Warehousing, distribution and storage of donated foods.
250.15 Financial management.
250.16 Maintenance of records.
250.17 Reports.
250.18 Audits.
250.19 Reviews.
250.20 Sanctions.
250.21 Civil rights.
250.22 Complaints.
250.23 Buy American.
250.24 Distributing
agency
performance
standards.

250.30

250.63 Commodity Supplemental Food Program.
250.64 Food Distribution Program in the
Trust Territory of the Pacific Islands.
250.65 Food Distribution Program on Indian
reservations.
250.66 Special Supplemental Nutrition Program for Women, Infants, and Children.

Subpart G—Other Donated Food Outlets
250.67 Charitable institutions.
250.68 Nutrition Services Incentive Program
(NSIP).
250.69 Disaster food assistance.
250.70 Food assistance in situations of distress.
AUTHORITY: 5 U.S.C. 301; 7 U.S.C. 612c, 612c
note, 1431, 1431b, 1431e, 1431 note, 1446a-1, 1859,
2014, 2025; 15 U.S.C. 713c; 22 U.S.C. 1922; 42
U.S.C. 1751, 1755, 1758, 1760, 1761, 1762a, 1766,
3030a, 5179, 5180.
SOURCE: 53 FR 20426, June 3, 1988, unless
otherwise noted.

Subpart A—General

Subpart C—Processing and Labeling of
Donated Foods
State processing of donated foods.

Subpart D—Donated Foods in Contracts
with Food Service Management Companies
250.50 Contract requirements and procurement.
250.51 Crediting for, and use of, donated
foods.
250.52 Storage and inventory management
of donated foods.
250.53 Contract provisions.
250.54 Recordkeeping and reviews.

Subpart E—National School Lunch Program
(NSLP) and Other Child Nutrition Programs
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250.59 Storage and inventory management
of donated foods.
250.60 Use of donated foods in the school
food service.
250.61 Child and Adult Care Food Program
(CACFP).
250.62 Summer
Food
Service
Program
(SFSP).

250.56 Provision of donated foods in NSLP.
250.57 Commodity schools.
250.58 Ordering donated foods and their provision to school food authorities.

§ 250.1 General purpose and scope.
This part prescribes the terms and
conditions under which donated foods
may be obtained from the Department
by Federal, State and private agencies
for use in any State in child nutrition
programs, nonprofit summer camps for
children, charitable institutions, nutrition programs for the elderly, the Commodity Supplemental Food Program,
the Special Supplemental Nutrition
Program for Women, Infants, and Children, the Food Distribution Programs
on Indian Reservations and the assistance of needy persons.
§ 250.2 Administration.
(a) Delegation to FNS. Within the Department, FNS shall act on behalf of
the Department in the administration

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§ 250.3

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of the program. FNS will provide assistance to distributing agencies and
evaluate all levels of program operations to assure that the goals of the
program are achieved in the most effective and efficient manner possible.
(b) Delegation to distributing agency.
The distributing agency is responsible
for effective and efficient administration of program operations within its
jurisdiction and shall administer the
program in accordance with the requirements of this part and FNS guidelines and instructions. Distributing
agencies may impose additional requirements for participation that are
not inconsistent with the provisions of
this part, except that this provision
shall not apply to distribution to
households on all or part of an Indian
reservation which is participating in
the Food Distribution Program under
part 253 and part 254 of this chapter.
The distributing agency shall provide
guidance to subdistributing agencies
and recipient agencies on all aspects of
program operations.
(c) Personnel. Each distributing agency shall provide adequate personnel, to
administer the program in accordance
with this part.
§ 250.3 Definitions.
7 CFR part 3016 means the Department’s regulations establishing uniform administrative requirements for
Federal grants and cooperative agreements and subawards to State, local,
and Indian tribal governments.
7 CFR part 3019 means the Department’s regulations establishing uniform administrative requirements for
Federal grants and cooperative agreements awarded to institutions of higher education, hospitals, and other nonprofit organizations.
Adult care institution means a nonresidential adult day care center that participates independently in CACFP, or
that participates as a sponsoring organization, in accordance with an agreement with the distributing agency.
AoA means the Administration on
Aging, which is the DHHS agency that
administers NSIP.
Bonus foods means Section 32, Section 416, and Section 709 donated foods,
as defined in this section, which are
purchased under surplus removal or

price support authority, and provided
to distributing agencies in addition to
legislatively authorized levels of assistance.
CACFP means the Child and Adult
Care Food Program, 7 CFR part 226.
Charitable institutions means public
institutions or nonprofit organizations,
as defined in this section, that provide
a meal service on a regular basis to
predominantly needy persons in the
same place without marked changes.
Charitable institutions include, but are
not limited to, emergency shelters,
soup kitchens, hospitals, retirement
homes, elderly nutrition projects;
schools, summer camps, service institutions, and child and adult care institutions that do not participate in a
child nutrition program, or as a commodity school, as they are defined in
this section; and adult correctional institutions that conduct rehabilitation
programs for a majority of inmates.
Child care institution means a nonresidential child care center that participates independently in CACFP, or that
participates as a sponsoring organization, in accordance with an agreement
with the distributing agency.
Child nutrition program means NSLP,
CACFP, SFSP, or SBP.
Commodities means foods donated, or
available for donation, by the Department under any of the legislation referred to in this part (see ‘‘Donated
Foods’’).
Commodity offer value means the minimum value of donated foods that the
distributing agency must offer to a
school food authority participating in
NSLP each school year. The commodity offer value is equal to the national per-meal value of donated food
assistance multiplied by the number of
reimbursable lunches served by the
school food authority in the previous
school year.
Commodity school means a school that
operates a nonprofit food service, in accordance with 7 CFR part 210, but that
receives additional donated food assistance rather than the cash assistance
available to it under Section 4 of the
Richard B. Russell National School
Lunch Act (42 U.S.C. 1753).
Contract value of the donated foods
means the price assigned by the Department to a donated food which shall

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§ 250.3

7 CFR Ch. II (1–1–09 Edition)

reflect the Department’s current acquisition price, transportation and, if applicable, processing costs related to the
food.
Contracting agency means the distributing agency, subdistributing agency,
or recipient agency which enters into a
processing contract.
Department means the United States
Department of Agriculture or the Commodity Credit Corporation, whichever
is the donor under the pertinent legislation.
DHHS means the United States Department of Health and Human Services.
Disaster means (a) Any natural catastrophe (including any hurricane, tornado, storm, high water, wind-driven
water, tidal wave, tsunami, earthquake, volcanic eruption, landslide,
mudslide, snowstorm, drought), or, regardless of cause, any fire, flood, or explosion, in any part of the United
States, which in the determination of
the President causes damage of sufficient severity and magnitude to warrant major disaster assistance under
the Robert T. Stafford Disaster Relief
and Emergency Assistance Act (42
U.S.C. 5121 et seq.) (Stafford Act) to
supplement the efforts and available
resources of States, local governments,
and disaster relief organizations in alleviating the damage, loss, hardship, or
suffering caused thereby; or
(b) Any other occasion or instance
for which, in the determination of the
President, Federal assistance is needed
to supplement State and local efforts
and capabilities to save lives and to
protect property and public health and
safety, or to lessen or avert the threat
of a catastrophe in any part of the
United States.
Disaster organizations means organizations authorized by appropriate Federal or State officials to assist disaster
victims.
Disaster victims means persons who,
because of acts of God or manmade disasters, are in need of food assistance,
whether or not they are victims of a
major disaster or an emergency as defined in this section.
Discount system means a system
whereby a recipient agency purchases
end products directly from a processor
at an established wholesale price minus

the contract value of the donated foods
contained in the end products.
Distributing agency means a State,
Federal or private agency, or Indian
Tribal Organization (ITO) which enters
into an agreement with the Department for the distribution of donated
foods to eligible recipient agencies and
recipients and the Food and Nutrition
Service of the Department when it accepts title to commodities from the
Commodity Credit Corporation (CCC)
for distribution to eligible recipient
agencies pursuant to the National
Commodity Processing System. A distributing agency may also be a recipient agency.
Distributor means a commercial food
purveyor or handler who is independent
of a processor and both sells and bills
for the end products delivered to recipient agencies.
Donated foods means foods donated,
or available for donation, by the Department under any of the legislation
referred to in this part (see ‘‘Commodities’’).
Elderly nutrition project means a recipient agency selected by the State or
Area Agency on Aging to receive donated foods in NSIP, for use in serving
meals to elderly persons.
End product means a food product
that contains processed donated foods.
Entitlement means the value of donated foods a distributing agency is authorized to receive in a specific program, in accordance with program legislation.
Entitlement foods means donated foods
that USDA purchases and provides in
accordance with levels of assistance
mandated by program legislation.
Federal acceptance service means the
acceptance service provided by:
(a) The applicable grading branches
of the Department’s Agricultural Marketing Service (AMS),
(b) The Department’s Federal Grain
Inspection Service, and
(c) The National Marine Fisheries
Service of the U.S. Department of Commerce.
Fee-for-service means the price by
pound or by case representing a processor’s cost of ingredients (other than
donated foods), labor, packaging, overhead, and other costs incurred in the

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Food and Nutrition Service, USDA

§ 250.3

conversion of the donated food into the
specified end product.
Fiscal year means the period of 12
months beginning October 1 of any calendar year and ending September 30 of
the following year.
FNS means the Food and Nutrition
Service of the Department of Agriculture.
FNSRO means the appropriate Food
and Nutrition Service Regional Office
of the Food and Nutrition Service of
the Department of Agriculture.
Food service management company
means a commercial enterprise, nonprofit organization, or public institution that is, or may be, contracted
with by a recipient agency to manage
any aspect of a recipient agency’s food
service, in accordance with 7 CFR parts
210, 225, or 226, or, with respect to charitable institutions, in accordance with
this part. To the extent that such management includes the use of donated
foods, the food service management
company is subject to the applicable
requirements in this part. However, a
school food authority participating in
NSLP that performs such functions is
not considered a food service management company. Also, a commercial enterprise that uses donated foods to prepare meals at a commercial facility, or
to perform other activities that meet
the definition of processing in this section, is considered a processor in this
part, and is subject to the requirements in subpart C of this part.
Household means a group of related
or non-related individuals, exclusive of
boarders, who are not residents of an
institution, but who are living as one
economic unit and for whom food is
customarily purchased and prepared in
common. It also means a single individual living alone.
In-kind replacement means replacement of lost donated foods with a quantity of the same foods of U.S. origin
that are of equal or better quality than
the lost foods and that are of at least
equal monetary value to the Department’s cost of replacing the lost foods.
Multi-State processor means:
(a) A processor which has entered
into a processing contract with contracting agencies in more than one
State, or

(b) A processor which has entered
into a processing contract with one or
more contracting agencies located in a
State other than the one in which either the processor’s plant or business
office is located.
National per-meal value means the
value of donated foods provided for
each reimbursable lunch served in
NSLP in the previous school year, and
for each reimbursable lunch and supper
served in CACFP in the previous school
year, as established in Section 6(c) of
the Richard B. Russell National School
Lunch Act.
Needy persons means:
(a) Persons provided service by charitable institutions, who, because of
their economic status, are in need of
food assistance,
(b) All the members of a household
who are certified as in need of food assistance, and
(c) Disaster victims.
Nonprofit organization means a private organization with tax-exempt status under the Internal Revenue Code.
Nonprofit organizations operated exclusively for religious purposes are
automatically tax-exempt under the
Internal Revenue Code.
Nonprofit school food service means all
food service operations conducted by
the school food authority principally
for the benefit of school children, all of
the revenue from which is used solely
for the operation or improvement of
such food services.
Nonprofit school food service account
means the restricted account in which
all of the revenue from all food service
operations conducted for the school
food authority principally for the benefit of school children is retained and
used only for the operation or improvement of the nonprofit school food service.
NSIP means the Nutrition Services
Incentive Program, which is administered by the United States Department
of Health and Human Services, in accordance with Section 311 of the Older
Americans Act of 1965 (42 U.S.C. 3030a).
NSLP means the National School
Lunch Program, 7 CFR part 210.
Performance supply and surety bond
means a written instrument issued by
a surety company which guarantees

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§ 250.3

7 CFR Ch. II (1–1–09 Edition)

performance and supply of end products by a processor under the terms of
a processing contract.
Processing means a commercial enterprise’s use of a commercial facility to:
(a) Convert donated foods into an end
product;
(b) Repackage donated foods; or
(c) Use donated foods in the preparation of meals.
Processor means a commercial enterprise that processes donated foods at a
commercial facility.
Recipient agencies means agencies or
organizations that receive donated
foods, in accordance with agreements
signed with a distributing agency, or
with another recipient agency.
Recipients means persons receiving
donated foods, or meals containing donated foods, provided by recipient
agencies.
Refund means (a) a credit or check
issued to a distributor in an amount
equal to the contract value of donated
foods contained in an end product sold
by the distributor to a recipient agency
at a discounted price and (b) a check
issued to a recipient agency in an
amount equal to the contract value of
donated foods contained in an end
product sold to the recipient agency
under a refund system.
Refund application means an application by a recipient agency in any form
acceptable to the processor which certifies purchase of end products and requests a refund of the contract value of
the donated foods contained in the end
products purchased.
Refund system means a system whereby a recipient agency purchases a processor’s end products and receives from
the processor a payment equivalent to
the contract value of the donated foods
contained in the end products.
Reimbursable meals means meals that
meet the nutritional standards established in Federal regulations pertaining to NSLP, SFSP, and CACFP,
and that are served to eligible recipients.
SBP means the School Breakfast Program, 7 CFR part 220.
School means (a) An educational unit
of high school grade or under, recognized as part of the educational system
in the State and operating under public
or nonprofit private ownership in a sin-

gle building or complex of buildings.
The term ‘‘high school grade or under’’
includes classes of preprimary grade
when recognized as part of the education system of the States;
(b) Any public or nonprofit private
classes of preprimary grade when they
are conducted in those schools defined
in paragraph (a) of this definition having classes of primary or of higher
grade;
(c) Any public or nonprofit private
residential child care institution, or
distinct part of such institution, which
operates principally for the care of
children, and if private, is licensed to
provide residential child care services
under the appropriate licensing code by
the State or a subordinate level of government, except for residential summer
camps which participate in the Summer Food Service Program for Children, Job Corps centers funded by the
Department of Labor and private foster
homes. The term ‘‘residential child
care institutions’’ includes, but is not
limited to: homes for the mentally,
emotionally or physically impaired,
and unmarried mothers and their infants; group homes; halfway houses; orphanages;
temporary
shelters
for
abused children and for runaway children; long-term care facilities for
chronically ill children; and juvenile
detention centers. A long-term care facility is a hospital, skilled nursing facility, intermediate care facility, or
distinct part thereof, which is intended
for the care of children confined for 30
days or more; or
(d) With respect to the Commonwealth of Puerto Rico, nonprofit child
care centers certified as such by the
Governor of Puerto Rico.
School food authority means the governing body which is responsible for
the administration of one or more
schools and which has the legal authority to operate a nonprofit school food
service therein or otherwise approved
by FNS to operate the NSLP.
School year means the period of 12
months beginning July 1 of any calendar year and ending June 30 of the
following calendar year.
Secretary means the Secretary of Agriculture.
Section 4(a) means section 4(a) of the
Agriculture and Consumer Protection

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Food and Nutrition Service, USDA

§ 250.3

Act of 1973, as amended (7 U.S.C. 612c
note). Section 4(a) authorizes the purchase of foods for distribution to maintain the traditional level of assistance
for food assistance programs as are authorized by law, including institutions,
supplemental feeding programs, disaster areas, summer camps for children, the Trust Territory of the Pacific
Islands, and Indians whenever a tribal
organization requests distribution of
federally-donated foods under section
4(b) of the Food Stamp Act of 1977 (7
U.S.C. 2013(b)).
Section 6 means section 6 of the National School Lunch Act, as amended
(42 U.S.C. 1755). Section 6 authorizes
the purchase of foods for distribution
to schools and institutions participating in child nutrition programs
under the National School Lunch Act
and specifies the level of assistance
which is to be provided.
Section 14 means section 14 of the National School Lunch Act, as amended
(42 U.S.C. 1762a). Section 14 authorizes
the purchase of foods for distribution
to maintain the annually programmed
level of assistance for programs carried
on under the National School Lunch
Act, the Child Nutrition Act of 1966,
and title III of the Older Americans
Act of 1965.
Section 32 means section 32 of Pub. L.
74–320, as amended (7 U.S.C. 612c). Section 32 authorizes the Department to
purchase nonbasic perishable foods
available under surplus-removal operations, for the purpose of encouraging
the domestic consumption of such
foods by diverting them from the normal channels of trade or commerce.
Section 311 means Section 311 of the
Older Americans Act of 1965 (42 U.S.C.
3030a), which authorizes State Agencies
on Aging under Title III of that Act,
and any Title VI grantee (Indian Tribal
Organization) under that Act, to receive all, or part, of their NSIP grant
as donated foods.
Section 416 means section 416 of the
Agricultural Act of 1949, as amended (7
U.S.C. 1431). Section 416 authorizes the
Department to donate basic nonperishable foods acquired through Federal
price-support operations for use by
needy persons, for use in nonprofit
school lunch programs and nonprofit
summer camps for children, and for use

in charitable institutions to the extent
that needy persons are served.
Section 709 means section 709 of the
Food and Agricultural Act of 1965, as
amended (7 U.S.C. 1446a–1). Section 709
authorizes the purchase of adequate
supplies of dairy products to meet the
requirements of schools, domestic relief distribution, and other programs
authorized by law when the stocks of
the Commodity Credit Corporation are
insufficient to meet those requirements.
Service institutions means recipient
agencies that participate in SFSP.
SFSP means the Summer Food Service Program, 7 CFR part 225.
Similar replacement means replacement of lost donated foods with a quantity of similiar foods of U.S. origin of
the same types as those normally donated by the Department and of at
least equal monetary value to the Department’s cost of replacing the lost
foods. Such replacement shall be subject to the approval of the FNSRO.
Single inventory management means
the commingling in storage of donated
foods and foods from other sources, and
the maintenance of a single inventory
record of such commingled foods.
Situation of distress means (a) A hurricane, tornado, storm, flood, high water,
wind-driven water, tidal wave, tsunami, earthquake, volcanic eruption,
landslide,
mudslide,
snowstorm,
drought, fire, explosion, or other natural catastrophe not declared by the
President to be a disaster, but which,
in the judgment of the distributing
agency, warrants the use of USDA
commodities for congregate feeding;
and
(b) Any other situation not declared
by the President to be a disaster, but
which, in the judgment of FNS, warrants the use of USDA commodities for
congregate feeding or household distribution.
State and United States means any one
of the 50 States, the District of Columbia, Puerto Rico, the Virgin Islands,
Guam, American Samoa, and the Trust
Territory of the Pacific Islands.
State Agency on Aging means:
(a) The State agency that has been
designated by the Governor and approved by DHHS to administer the Nutrition Services Incentive Program; or

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§ 250.10

7 CFR Ch. II (1–1–09 Edition)

(b) The Indian Tribal Organization
that has been approved by DHHS to administer the Nutrition Services Incentive Program.
Storage facility means an operation
that provides warehousing services, or
provides both warehousing and delivery
services.
Subdistributing agency means an agency performing one or more distribution
functions for a distributing agency
other than, or in addition to, functions
normally performed by common carriers or warehousemen. A subdistributing agency may also be a recipient
agency. State and local agencies, and
Indian Tribal Organizations administering the Emergency Food Assistance Program, the Food Distribution
Program on Indian Reservations, or
the Commodity Supplemental Food
Program, are subdistributing agencies
subject to all provisions relative to
subdistributing agencies contained in
this part, unless specifically exempt
under part 251, part 253, part 254, or
part 247 of this chapter.
Substituted food means domestically
produced food that is purchased or
manufactured by a processor and is
substituted for donated food.
Substitution means:
(a) The replacement of donated foods
with like quantities of domestically
produced commercial foods of the same
generic identity and of equal or better
quality (i.e. cheddar cheese for cheddar
cheese, nonfat dry milk for nonfat dry
milk, etc.).
(b) In the case of donated nonfat dry
milk, substitution as defined under (a)
of this definition or replacement with
an equivalent amount, based on milk
solids content, of domestically produced concentrated skim milk.
(c) A processor can substitute commercial product for donated commodity, as described in paragraph (a) of
this section, without restrictions under
full substitution. The processor must
return to the contracting agency, in
finished end products, the same number of pounds of commodity that the
processor originally received for processing under full substitution. This is
the 100-percent yield requirement.
(d) A processor can substitute commercial product for donated commodity product, as described in para-

graph (a) of this section, with some restrictions under limited substitution.
Restrictions include, but are not limited to, the prohibition against substituting for backhauled poultry commodity product. FNS may also prohibit
substitution of certain types of the
same generic commodity. (For example, FNS may decide to permit substitution for bulk chicken but not for
canned chicken.)
Summer camp means a nonprofit or
public camp for children aged 18 and
under.
Welfare agency means a public (Federal, State or local) or private agency
offering assistance on a charitable or
welfare basis to needy persons, who are
not residents of an institution, and to
Tribal councils designated by the Bureau of Indian Affairs.
[53 FR 20426, June 3, 1988, as amended at 53
FR 20598, June 6, 1988; 53 FR 27475, July 21,
1988; 58 FR 39120, July 22, 1993; 59 FR 16972,
Apr. 11, 1994; 59 FR 62983, Dec. 7, 1994; 62 FR
8365, Feb. 25, 1997; 62 FR 53729, Oct. 16, 1997;
64 FR 72902, Dec. 29, 1999; 67 FR 65014, Oct. 23,
2002; 73 FR 46183, Aug. 8, 2008]

Subpart B—General Operating
Provisions
§ 250.10 Eligible distributing and subdistributing agencies.
(a) State and Federal agencies. Federal
agencies and such State agencies as are
designated by the Governor of the
State, or by the State legislature, and
approved by the Secretary are eligible
to become distributing agencies.
(b) Private agencies. Where distributing agencies are not permitted by
law to make distribution to private recipient agencies, or to any class of private recipient agency, private agencies
which agree to make distribution of donated food on a State-wide basis and
which apply directly to FNS, and are
approved by the Secretary are eligible
to become distributing agencies.
(c) Subdistributing agencies. If distributing agencies use subdistributing
agencies to distribute donated foods,
the distributing agencies’ responsibilities to the Department for overall
management and control of the distribution program shall not be delegated to such subdistributing agencies.

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§ 250.12

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§ 250.11 Eligibility determination for
recipient agencies and recipients.
(a) Verification of recipient agency eligibility. Distributing agencies at the request of FNS shall:
(1) Verify that recipient agencies registered to participate in the National
Commodity Processing (NCP) Program
have a current agreement with the distributing agency to receive donated
food in accordance with § 252.1(c) and
(2) Report the results of such
verification to FNS within timeframes
determined by FNS.
(b) Eligibility of recipient agencies and
recipients. Distributing agencies shall
determine the eligibility of any agency
which submits an application for participation in the program. Distributing
agencies shall consider the past performance of recipient agencies when
approving applications for participation. Once a recipient agency has been
determined to be eligible for participation in the program, the distributing
agency shall enter into an agreement
with the agency in accordance with
§ 250.12(b) and make donated food available. Distributing agencies shall impose upon welfare agencies the responsibility for determining that recipients
to whom welfare agencies distribute
donated foods are eligible: Provided,
however: That the State agency or
FNSRO administering the applicable
program shall determine the eligibility
under this part of school food authorities participating under part 210 or
part 220, or sponsors participating in
the Summer Food Service Program for
Children under part 225, of this chapter, and of nonresidential child care institutions participating in the Child
Care Food Program under part 226 of
this chapter.
§ 250.12 Agreements.
(a) Agreements with Department. Prior
to the beginning of a distribution program, distributing agencies shall enter
into written agreements with the Department which shall incorporate the
terms and conditions set forth in this
part. When requested by the Department an eligible agency shall present
evidence of its authority to enter into
such agreements. The agreements shall
be considered permanent, with amendments initiated by distributing agen-

cies, or submitted by them at the Department’s request, all of which shall
be subject to approval by the Department.
(b) Distributing agency agreements.
Distributing agencies shall enter into
written agreements with all subdistributing agencies, recipient agencies,
warehouses, carriers, or other entities
to which distributing agencies deliver
donated foods under their distribution
program. Distributing agencies shall be
responsible for ensuring that program
integrity is maintained by all entities
with whom agreements are entered
into. All agreements shall contain such
terms and conditions as the distributing agency deems necessary to ensure that:
(1) The distribution and use of donated foods is in accordance with this
part,
(2) Subdistributing agencies, recipient agencies, warehouses, carriers, or
other persons to whom donated foods
are delivered by the distributing agency are responsible to the distributing
agency for any improper distribution
or use of donated foods or for any loss
of, or damage to, donated foods caused
by their fault or negligence,
(3) Subdistributing agencies and recipient agencies have and preserve a
right to assert claims against other
persons to whom donated foods are delivered for care, handling or distribution, and
(4) Subdistributing agencies and recipient agencies will take action to obtain restitution in connection with
claims for improper distribution, use or
loss of, or damage to, donated foods.
(c) Duration of distributing agency
agreements—(1) Recipient agencies. Distributing agency agreements with recipient agencies shall be considered
permanent, with amendments to be
made as necessary. Distributing agencies shall ensure that recipient agencies provide, on a timely basis, by
amendment to the agreement, any
changed information, including, but
not limited to, any changes resulting
from amendments to Federal regulatory requirements and policy and
changes in site locations, and number
of meals or needy persons to be served.
(2) Subdistributing agencies, carriers,
and other entities. Distributing agency

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§ 250.13

7 CFR Ch. II (1–1–09 Edition)

agreements with subdistributing agencies (as defined in § 250.3) that are not
recipient agencies, carriers, and other
entities shall be in effect for not longer
than one year, and shall provide that
they may be extended at the option of
both parties for two additional oneyear periods. The party contracting
with the distributing agency shall update all pertinent information and
demonstrate that all donated food received during the period of the previous
agreement has been accounted for, before an agreement is extended.
(3) Termination of agreements. Agreements may be terminated for cause by
either party upon 30 days notice.

cprice-sewell on PRODPC61 with CFR

[53 FR 20426, June 3, 1988, as amended at 62
FR 53729, Oct. 16, 1997; 73 FR 46184, Aug. 8,
2008]

§ 250.13 Distribution and control of donated foods.
(a) Availability and use of donated
foods—(1) General. (i) Donated foods
shall be available only for distribution
and use in accordance with the provisions of this part and, with respect to
distribution to households on all or
part of an Indian reservation, of parts
253 and 254 of this chapter.
(ii) Donated foods shall not be sold,
exchanged or otherwise disposed of
without the approval of the Department.
(iii) Donated foods which are provided as part of an approved food package or authorized level of assistance
may be transferred between like recipient agencies only with prior authorization of the distributing agency. Donated foods which are provided in addition to the State’s authorized level of
assistance may be transferred between
recipient agencies which are eligible to
receive such foods with the prior authorization of the distributing agency.
However, the transfer of donated foods
between unlike recipient agencies (e.g.,
from schools to charitable institutions), which have been provided as
part of an approved food package or authorized level of assistance, must be
approved by the appropriate FNSRO.
(iv) Food donated under section 32 of
Public Law 74–320 (7 U.S.C. 612c) may
also be transferred by recipient agencies to eligible recipient agencies
which are distributing donated foods

under part 251 of this chapter. A transfer between recipient agencies and eligible recipient agencies may be made
only with the prior approval of the distributing agency and the State agency
responsible for administering TEFAP.
(v) All transfers of donated foods
shall be documented. Such documentation shall be maintained in accordance
with the recordkeeping requirements
in §§ 250.16 and 251.10(a) of this chapter.
(2) Quantities. (i) The quantity of donated foods to be made available for
donation under this part shall be determined in accordance with the pertinent
legislation and the program obligations of the Department, and shall be
such as can be effectively distributed
to further the objectives of the pertinent legislation.
(ii) Donated foods shall be requested
and distributed only in quantities
which can be consumed without waste
in providing food assistance for persons
eligible under this part. Distributing
agencies shall impose similar restrictions on recipient agencies.
(3) Minimum donations. Foods shall be
donated only in such quantities as will
protect the lower truck load freight
rate, except as the Department determines to be in the best interest of the
program.
(4) Allocations. As foods become available for donation, FNS shall notify distributing agencies regarding the donated foods, the class or classes of recipient agencies or recipients eligible
to receive them, and any special terms
and conditions of donation and distribution which attach to a particular
donated food, in addition to the general
terms and conditions set forth herein.
When a commodity is available in
limited quantities, the Department
shall allocate such commodities among
the States using allocation percentages
which are based on appropriate participation data for the program designated
to receive the commodity.
(5) Commodity value. Distributing
agencies shall establish a value for
each commodity for school food authorities and nonresidential child and
adult care institutions for purposes of
offering and crediting each recipient
agency with the correct amount of
commodities to fulfill planned commodity assistance levels (i.e., volume

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Food and Nutrition Service, USDA

§ 250.13

of commodities expected to be needed
in order to meet the anticipated assistance at the local level, as determined
by the distributing agency). Each commodity value shall be used consistently
throughout the State to value commodities. The distributing agencies
shall document and maintain on file
for FNS review the method used to determine commodity values. Distributing agencies shall notify recipient
agencies of the cost-per-pound used to
value commodities at the time a commodity is offered to recipient agencies.
If the cost used to credit a commodity
differs from the cost used to offer a
commodity, distributing agencies shall
also advise recipient agencies of the
cost used to credit a commodity. To
value a commodity offered to a recipient agency and to credit a commodity
towards a recipient agency’s planned
commodity assistance level, distributing agencies shall use one of the following: The actual cost-per-pound data
used to charge a State’s commodity entitlement; the estimated cost-perpound data provided by the Department; or the USDA commodity file
cost as of a specified date. Actual cost
data shall be defined as the cost-perpound for an individual commodity
charged to a State’s entitlement on the
Entitlement Food Order Report, which
is based on the USDA purchase cost.
Estimated cost data shall be defined as
the cost provided by USDA on commodity survey memoranda. The USDA
commodity file cost shall be defined as
the cost that is listed for a commodity
as of a date specified by the distributing agency. For purposes of complying with OMB Circular A–133, Audits of States, Local Governments, and
Non-Profit Organizations on inventory
valuation, recipient agencies shall
comply with guidance provided by the
Food and Nutrition Service. (For availability of OMB Circulars referenced in
this paragraph (a), see 5 CFR 1310.3.)
(6) Announcement and delivery of commodities. The Department shall make
every reasonable effort to arrange commodity deliveries based on information
obtained from distributing agencies.
However, the Department shall not be
held fiscally responsible for any delay
in delivering or for nondelivery of donated foods due to any cause. Distrib-

uting agencies shall maintain monthly
distribution schedules which provide
for equitable and reliable deliveries to
recipient agencies, recognize local
hours of operation, holidays and vacations and, whenever possible, other special needs of recipient agencies. Upon
request by the recipient agency, the
distributing agency may make deliveries less frequent than monthly when
the distributing agency determines
that monthly service is not cost effective, due to distance or the size of a
food order, or other necessary reasons,
such as seasonal school closures. Distributing agencies shall notify recipient agencies of:
(i) General USDA purchase information at least quarterly;
(ii) Anticipated State delivery schedules at least quarterly, including the
types and quantities of commodities
available; and
(iii) Changes in delivery schedules
when such changes affect the recipient
agency.
(7) Demonstrations and tests. Notwithstanding any other provision of this
part, a quantity of any food donated
for use by any recipient agency or recipient may be transferred by the distributing agency or by the recipient
agency to bona fide experimental or
testing agencies, or for use in workshops, or for demonstrations or tests
relating to the utilization of such donated food by the recipient agency or
recipient. No such transfer by any recipient agency shall be made without
the approval of the appropriate distributing agency.
(b) Processing and other costs. The Department shall pay such processing, reprocessing, transporting, handling and
other charges accruing up to the time
of transfer of title to distributing agencies as is deemed in the best interest of
the Department.
(c) Transfer of title. Title to donated
foods shall pass to distributing agencies upon their acceptance of donated
foods at time and place of delivery,
limited, however, by the obligation of
the distributing agency to use such donated foods for the purposes and upon
the terms and conditions set forth in
this part.

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§ 250.13

7 CFR Ch. II (1–1–09 Edition)

(d) Distribution of donated foods to recipient agencies or recipients—(1) Distribution. Donated foods shall be distributed only to recipient agencies and
recipients eligible to receive them
under this part (see subpart D). Distributing agencies shall require that
welfare agencies and disaster organizations distribute donated foods only to
recipients eligible to receive them
under this part. It shall not be deemed
a failure to comply with the provisions
of this part if recipient agencies serve
meals containing donated foods to persons other than those who are eligible
under this part, when such persons
share common preparation, serving or
dining facilities with eligible persons
(needy persons, children, participants
in nutrition programs for the elderly)
and at least one of the following is
true:
(i) Such other persons are common
beneficiaries with the eligible persons
of the program of the recipient agency,
or
(ii) Such other persons are few in
number compared to the eligible persons and receive their meals as an incident of their service to the eligible persons.
Such other persons include, but are not
limited to teachers, disaster relief
workers, and staff members. Nothing in
this paragraph shall be construed as
authorizing allocation or issuance of
donated foods to recipient agencies in
greater quantity than that authorized
for the assistance of persons eligible
under this part.
(2) Normal food expenditures. Section
416 donated foods shall not be distributed to any recipient agencies or recipients whose normal food expenditures are reduced because of the receipt
of donated foods.
(e) Improper distribution, loss of or
damage to donated foods. (1) If a distributing agency improperly distributes or
uses any donated foods or causes loss of
or damage to a donated food through
its failure to provide proper storage,
care or handling, the provisions set
forth in § 250.15(c) shall apply.
(2) In instances when it is determined
by a distributing agency that a claim
exists against a subdistributing agency, recipient agency, warehouse, carrier, processor or other person, the dis-

tributing agency shall pursue claims in
accordance with § 250.15(c).
(f) Disposition of damaged or out-ofcondition foods. Donated foods which
are found to be damaged or out-of-condition and are declared unfit for human
consumption by Federal, State or local
health officials, or by other inspection
services or persons deemed competent
by the Department, shall be disposed of
in accordance with instructions of the
Department. Such instructions may direct that unfit donated food be:
(1) Sold in a manner prescribed by
the Department with the net proceeds
thereof remitted to the Department;
(2) Sold in a manner prescribed by
the Department with the proceeds
thereof retained for use in accordance
with the provisions of § 250.15(f);
(3) Used in such manner as will serve
a useful purpose as determined by the
Department; or
(4) Destroyed in accordance with applicable sanitation laws and regulations.
Upon a finding by the Department that
donated food are unfit for human consumption at the time of delivery to the
distributing agency and when the Department or appropriate health officials require that such donated foods
be destroyed, the Department may pay
to the distributing agency any expenses incurred in connection with
such donated foods as determined by
the Department. The Department may,
in any event, repossess damaged or
out-of-condition donated foods.
(g) Replacement of damaged commodities. (1) The Department shall replace
donated foods received by distributing
or recipient agencies when:
(i) The distributing agency documents that the donated foods were
stale, spoiled, out of condition or not
in compliance with USDA specifications at the time they were delivered
by the Department;
(ii) The donated foods have been provided as part of the State’s authorized
level of assistance (entitlement) as established by law; or, when the donated
foods have been provided in addition to
the State’s entitlement, but the total
amount of the specific donated food
which the distributing agency can
order is limited by the Department;

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Food and Nutrition Service, USDA

§ 250.13

(iii) The loss is reported to the
FNSRO within three months of the
date the donated foods were received in
the State, except that for canned commodities the reporting deadline shall
be six months after receipt;
(iv) A signed consignee receipt or acceptable written documentation of delivery is submitted to the FNSRO; and
(v) At the request of the Department,
the product has been reinspected and
has been determined to be stale,
spoiled, out of condition or not in compliance with USDA specifications.
(2) In instances in which a recipient
agency seeks replacement of donated
foods, the recipient agency shall submit the information listed above to its
distributing agency. The distributing
agency shall promptly submit the information to the FNSRO.
(3) Replacement by the vendor shall
be made with either the same or similar food agreed to by the Department.
Physical replacement shall be on a perpound or per-case basis. In rare instances, and only with the approval of
the Department, distributing agency
and recipient agency, vendor replacement will be made with a cash payment to the recipient or distributing
agency. Any such cash payments shall
be used to purchase replacement commodities which are the same or similar
to the original commodities. Cash payments shall be made on the basis of the
dollar value established by the Department of the donated food at the time
the product was delivered or the cost
to the Department for replacement,
whichever is higher.
(4) Replacement by the Department
shall be with either the same or similar
food or by crediting the State’s entitlement or cap. Physical replacement
shall be on a per-pound or per-case
basis. Entitlement or cap crediting
shall be equal to the dollar value or the
number of pounds which was deducted
from the State’s entitlement or cap for
that shipment. The Department shall
arrange for delivery of the replacement
donated foods when the quantities to
be delivered are sufficient to make it
cost effective. Once the Department
has replaced the donated foods, the distributing agency shall make arrangements for providing replacement do-

nated foods to the recipient agency
which incurred the loss.
(5) In instances in which it is determined that the donated foods were in
good condition at the time they were
delivered by the Department, the cost
of the reinspection shall be borne by
the distributing agency and the distributing agency shall follow the claims
procedures contained in § 250.15(c) of
this part and FNS Instruction 410–1,
Non-Audit Claims—FNS Distribution
Program.
(h) Redonations. Whenever a distributing agency has any donated food on
hand which it cannot efficiently utilize, it shall immediately make a request to the appropriate FNSRO, in
writing, for instructions as to the disposition of such donated food. Distributing agencies requesting authority
from the Department to make redonation of any donated foods shall, upon
the Department’s request, have such
donated foods federally inspected. Expenditures incurred by the distributing
agency as a result of redonation shall
be
handled
in
accordance
with
§ 250.15(e).
(i) Embezzlement, misuse, theft, or obtainment by fraud of donated foods and
donated food-related funds, assets, or
property. Notwithstanding paragraph
(c) of this section concerning transfer
of title to donated foods, whoever embezzles, willfully misapplies, steals, or
obtains by fraud, donated foods or any
funds, assets, or property deriving from
donated foods or whoever receives, conceals, or retains such donated foods,
funds, assets, or property for his/her
own use or gain, knowing such donated
foods, funds, assets, or property have
been embezzled, willfully misapplied,
stolen, or obtained by fraud shall be
subject to Federal criminal prosecution under section 12(g) of the National
School Lunch Act, as amended (42
U.S.C. 1760(g)) or section 4(c) of the Agriculture and Consumer Protection Act
of 1973, as amended (7 U.S.C. 612c note).
For the purpose of this paragraph
‘‘funds, assets, or property’’ include,
but are not limited to funds accruing
from the sources identified in § 250.15(f)
(1) and (2), donated foods which have
been processed into different end products as provided for under subpart C of
this part, and the containers in which

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§ 250.14

7 CFR Ch. II (1–1–09 Edition)

donated foods have been received from
the Department. Distributing agencies
shall immediately notify FNSRO of
any suspected violation of section 12(g)
or section 4(c) to allow the Department, in conjunction with the U.S. Department of Justice, to determine
whether Federal criminal prosecution
under section 12(g) or section 4(c) is
warranted. Prosecution of violations
by the Federal Government shall not
relieve any distributing agency of its
obligation to obtain recovery for improperly distributed or lost donated
foods, as required by § 250.15(c).
(j) Commodity specifications. Distributing agencies shall make summaries
of commodity specifications available
to recipient agencies upon request.
(k) Commodity acceptability reports. To
ensure that the Department is kept apprised of the commodities and packaging that are preferred by recipients
and participating agencies, information shall be collected as follows:
(1) Information collection. Distributing
agencies shall obtain information from
recipient agencies which reflects:
(i) The types and forms of donated
foods that are most useful to recipients;
(ii) Commodity specification recommendations; and
(iii) Requests for options regarding
package sizes and forms of commodities.
(2) Samples and representation. The
distributing agency shall collect information from recipient agencies from
each of the following program categories: The National School Lunch
Program, the Child and Adult Care
Food Program, the Nutrition Program
for the Elderly, the Commodity Supplemental Food Program, and the Food
Distribution Program on Indian Reservations. At a minimum, distributing
agencies shall obtain this information
from a sample of at least 10 percent or
100 recipient agencies in each program
category, whichever is less. To ensure
that the sample is representative of all
recipient agencies, distributing agencies shall consider the size and geographic location of all recipient agencies within the State and alternate
among them so that over time each recipient agency is provided an opportunity to express its views. Distrib-

uting agencies are encouraged to extract information regarding commodity acceptability from all available
sources.
(3) Timeframes for submission. Distributing agencies shall submit commodity
acceptability reports to the appropriate FNSRO by April 30th of each
year on form FNS–663.
[53 FR 20426, June 3, 1988, as amended at 53
FR 22469, June 16, 1988; 53 FR 27475, July 21,
1988; 58 FR 39120, July 22, 1993; 62 FR 53730,
Oct. 16, 1997; 64 FR 72902, Dec. 29, 1999; 67 FR
65015, Oct. 23, 2002]

§ 250.14 Warehousing, distribution and
storage of donated foods.
(a) Standards for Warehousing and Distribution Systems—(1) Use of cost efficient
and effective facilities. Distributing
agencies shall use the most cost effective and efficient system for providing
warehousing and distribution services
to recipient agencies. For the purpose
of this part, commercial facilities are
defined as enterprises that provide
commercial warehousing services or
commercial delivery services, or those
commercial enterprises that provide
both warehousing and delivery services.
(2) Timeframes for evaluation. All distributing agencies shall evaluate their
current warehousing and distribution
systems. Initial evaluations shall be
submitted to the FNSRO by June 30,
1990. Subsequent evaluations of noncommercial systems shall, at a minimum, be submitted to FNS every
three years by March 31.
(3) Evaluation of current systems. The
evaluation of the system in place shall,
at a minimum, include the following
information:
(i) A description of the principal
warehousing/delivery techniques used
by the distributing agency. The description should include:
(A) The frequency of delivery available;
(B) The timeframes for making deliveries;
(C) The type of delivery service offered (to the loading dock or placement
in the storeroom); and
(D) The system for recipient agencies
to order specific amounts of food from
available inventory; and

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Food and Nutrition Service, USDA

§ 250.14

(ii) An estimate of all costs that will
be incurred in administering the Food
Distribution Program for the upcoming
school year. These costs include transportation, storage and handling of donated foods (if the current distributing
agency system does not include delivery to recipient agencies, identification of costs incurred by recipient
agencies to pick up commodities at a
warehouse and to deliver the food to a
centralized storage facility or the individual preparation sites), salaries of
persons directly connected with the administration of the program and other
program related expenses. These expenses shall include fringe benefits,
travel expenses, rent, utilities, accounting/auditing services to recipient
agencies such as the costs for administering and monitoring the State’s
processing program, and technical assistance workshops.
(4) Comparison of existing system with
commercial systems. All distributing
agencies which do not use commercial
facilities
for
a
basic
level
of
warehousing and distribution services
shall compare the cost of warehousing
and distributing commodities under
their current system with the cost of
comparable services under a commercial system for the upcoming school
year.
(i) The cost comparison shall be
made between the cost of providing a
basic level of service under its current
system and the cost of obtaining an
equivalent level of service from commercial facilities. This basic level of
service shall consist of the transportation, storage and handling of donated
food from the time of delivery by the
Department to a distributing agency
until delivery to a recipient agency’s
centralized storage facility or individual preparation sites and shall include monthly deliveries of donated
food to all recipient agencies except
those that have agreed to less frequent
deliveries.
(ii) A distributing agency may base
its cost comparison on a level of service in excess of the basic level and/or
on services not currently provided. In
all cases, the comparison must be made
on the costs of providing a comparable
level of service under the existing sys-

tem (as identified in § 250.14(a)(2))
versus a commercial system.
(iii) If a distributing agency is unable
to locate any commercial facilities expressing interest in providing the basic
level of warehousing and distribution
services, the distributing agency shall
indicate this in its cost comparison
submission, together with documentation of its efforts to obtain cost estimates from commercial facilities.
(iv) All initial data regarding the
cost of the current warehousing and
distribution system and the cost for
comparable commercial facilities shall
be submitted to the FNSRO by June 30,
1990. Subsequent cost comparisons
shall, at a minimum, be submitted to
FNS once every three years by March
31.
(5) Approval to use other systems. Distributing agencies that do not implement a commercial warehousing and
distribution system shall apply to the
FNSRO for approval to use other facilities and must demonstrate that other
facilities are more cost effective and
efficient. All requests for a waiver
shall be accompanied with a full evaluation of the existing system complete
with cost comparison data. Each request will be considered on a case by
case basis. Initial requests for approval
of alternative systems shall be submitted to the FNSRO by June 30, 1990.
Subsequent requests shall, at a minimum, be submitted to the FNSRO
once every three years by March 31.
(6) System implementation. (i) Distributing agencies shall implement the
most cost effective and efficient system for warehousing and distribution
services to recipient agencies by July
1, 1991. Unless otherwise approved by
the FNSRO, subsequent to July 1, 1991,
a distributing agency shall convert to a
commercial system within six months
of:
(A) The date of submission of evaluation and cost comparison data indicating that a commercial system is
more cost effective and efficient (if no
request for approval of an alternate
system is made); or
(B) The date of the denial of a request to use an alternative system.
(ii) If at any time FNS determines
that the warehousing and distribution
system in place is not cost effective or

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§ 250.14

7 CFR Ch. II (1–1–09 Edition)

efficient, the distributing agency will
be required to reevaluate its system
(including a cost comparison and request for continued approval to use an
alternative system) in accordance with
this subsection within 90 days of notification by the FNSRO.
(7) Revisions in system. All distributing agencies (using either commercial or noncommercial systems) shall
request approval from the FNSRO at
least 90 days in advance of any planned
reduction in the level of service provided or any increase in distribution
charges beyond normal inflation. If
FNS determines the proposed changes
are inappropriate, FNS may require
the distributing agency to submit additional justification, deny the request,
or request a reevaluation of the system
in accordance with paragraph (a)(6)(ii)
of this section.
(b) Standards for storage facilities. Distributing
agencies,
subdistributing
agencies and recipient agencies shall
provide facilities for the handling,
storage and distribution of donated
foods which:
(1) Are sanitary and free from rodent,
bird, insect and other animal infestation;
(2) Safeguard against theft, spoilage
and other loss;
(3) Maintain foods at proper storage
temperatures;
(4) Excepting recipient agencies,
stock and space foods in a manner so
that USDA-donated foods are readily
identified;
(5) Store donated food off the floor in
a manner to allow for adequate ventilation; and
(6) Take other protective measures as
may be necessary.
Distributing agencies, subdistributing
agencies and recipient agencies shall
ensure that storage facilities have obtained all required Federal, State and/
or local health inspections and/or approvals and that such inspection/approvals are current.
(c) Reviews. All distributing agencylevel storage facilities shall be reviewed annually. Distributing agencies
shall ensure that subdistributing and
recipient agencies conduct annual reviews of their respective storage facilities. Documentation shall be maintained on file at the distributing agen-

cy or local level as appropriate to reflect compliance with this section, including documentation of corrective
action in cases of noncompliance. Corrective action must be taken immediately on all deficiencies identified in
the review and the result of the corrective action must be forwarded to the
distributing agency. Where applicable,
the distributing agency shall determine and pursue claims in accordance
with § 250.15(c).
(d) Contracts. When contracting for
storage facilities, distributing agencies
and subdistributing agencies shall
enter into written contracts to be effective for no longer than five years,
including option years extending a contract. Before the exercise of option
years, the storage facility shall update
all pertinent information and demonstrate that all donated foods received during the previous contract period have been accounted for. The contract shall, at a minimum, contain the
following:
(1) Assurance that the storage facilities will be maintained in accordance
with the standards specified in paragraph (b) of this section;
(2) Evidence that donated food shall
be clearly identified;
(3) Assurance that an inventory system shall be maintained and an annual
physical inventory will be conducted;
and reconciled with the inventory
records;
(4) Beginning and ending dates of the
contract;
(5) A provision for immediate termination of the contract due to noncompliance on the part of the warehouse management;
(6) A provision allowing for termination of the contract for cause by either party upon 30 days written notification;
(7) The amount of any insurance coverage, which has been purchased to
protect the value of food items which
are being stored; and
(8) Express written consent for inspection and inventory by the distributing agency, subdistributing agency,
recipient agency, the Comptroller General, the Department or any of their
duly authorized representatives.
(e) Physical inventory. During the annual review required by paragraph (c)

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Food and Nutrition Service, USDA

§ 250.15

of this section, distributing agencies
and subdistributing agencies shall take
a physical inventory of their storage
facilities. The physical inventory shall
be reconciled with each storage facility’s book inventory. The reconciliation
records shall be maintained by the
agency that contracted for or maintained the storage facility. Food items
that have been lost, stolen, or found to
be out of condition, shall be identified
and recorded. Potential excessive inventory, as described in paragraph (f)
of this section, shall be reported by the
subdistributing agency to the distributing agency. Corrective action on
each deficiency noted during these inventories shall be initiated immediately, and a written report of those
corrective actions shall be forwarded to
the distributing agency. Where applicable, the distributing agency shall pursue
claims
in
accordance
with
§ 250.15(c).
(f) Excessive inventories. (1) The distributing agency shall determine if a
subdistributing agency’s inventories
are excessive based on:
(i) The rate of distribution;
(ii) Anticipated distribution; and
(iii) Other concerns such as logistical
and economic considerations.
(2) In no case may the inventory level
of each donated food in storage exceed
a six-month supply unless sufficient
justification for additional inventory
has been submitted and approved. Subdistributing agencies shall submit justification to the distributing agency in
instances where more than a six-month
inventory is needed. Justification shall
be submitted by the distributing agency to the FNSRO for approval in instances where more than a six-month
inventory is needed at the distributing
agency level.
(3) The distributing agency shall take
corrective action to ensure that excess
inventories at all levels are eliminated
and shall document actions taken to
reduce excessive inventories.

cprice-sewell on PRODPC61 with CFR

[53 FR 20426, June 3, 1988, as amended at 54
FR 42475, Oct. 17, 1989; 62 FR 53730, Oct. 16,
1997; 67 FR 65015, Oct. 23, 2002]

§ 250.15 Financial management.
(a) Distribution charges. (1) Recipient
agencies may be required to pay part
or all of the direct costs for intrastate

storage and distribution of donated
food through distribution charges assessed by the distributing or subdistributing agency, except as provided
in paragraph (a)(2) of this section.
(i) Distributing and subdistributing
agencies assessing distribution charges
shall submit a description of their system with all data used in calculating
the rate to be used for the upcoming
school year to the FNSRO for approval.
The initial description and data shall
be submitted by June 30, 1990. Updates
to this information shall, at a minimum, be submitted to the FNSRO for
approval every three years by March
31.
(ii) At least 90 days before increasing
distribution charges beyond normal inflation,
the
distributing/subdistributing agency shall submit to the
FNSRO a description of the change together with all data used to calculate
the change. FNS will take action on
the proposed increase in accordance
with paragraph (a)(1)(v) of this section.
(iii) Allowable costs include but are
not limited to those program costs referenced in paragraph (f)(2) of this section, i.e. transportation, storage and
handling of donated foods, salaries of
persons directly connected with the administration of the program and other
program related expenses. Examples of
other program related expenses are administrative costs such as fringe benefits, travel expenses, rent, utilities, accounting/auditing services, computer
services, and the costs of providing program services to recipient agencies
such as the cost for administering and
monitoring the State’s processing program, and technical assistance workshops.
(iv) Distribution charges shall not be
assessed for costs which would be unallowable under the Cost Principles in
the Department’s Uniform Federal Assistance Regulations, 7 CFR part 3015,
subpart T. In no case may distribution
charges be assessed for costs which are
paid for by State Administrative Expense (SAE) funds, State or local appropriated funds or any other funds
available to the distributing or subdistributing agency to administer the
program. Distribution charges shall
not be based on a percentage of the
value of the commodities distributed.

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§ 250.15

7 CFR Ch. II (1–1–09 Edition)

(v) FNS shall review the information
and inform the distributing agency of
the appropriateness of its distribution
charges. If it is determined that a distributing agency’s proposed distribution charges are excessive or incorporate inappropriate costs, the distributing/subdistributing agency will be required to adjust the distribution
charges to reflect an appropriate level
or submit further justification sufficient to satisfy the FNSRO that the
proposed distribution charges are essential to cover allowable costs and
services. This further justification
shall include information from recipient agencies regarding their satisfaction with services provided.
(vi) Distribution charges, including
any excess distribution charges which
may accrue (as defined in paragraph
(f)(4) of this section) shall be used in
accordance with provisions of paragraph (f) of this section.
(2) Whenever a commodity is donated
to a State without charge or credit
against entitlement, recipient agencies
may not be assessed for any part of the
intrastate costs of storage and transportation of such commodity that is in
excess of the distributing or subdistributing agency’s direct costs for such
storage and transportation minus any
amount that the Department provides
to the State to pay such costs under
part 251 of this chapter.
(3) Under no circumstances shall recipients be required to make any payments in money, materials, or services
for or in connection with the receipt of
donated foods, nor shall voluntary contributions be solicited (except for the
nutrition programs for the elderly) in
connection with the receipt of donated
foods for any purpose.
(b) Sale of containers. When containers or packing materials in which
donated foods are received are disposed
of by sale, the proceeds of such sale
shall be used solely in accordance with
the provisions of paragraph (f)(2) of
this section.
(c) Claims. If a distributing agency
improperly distributes or uses any donated foods, or causes loss of or damage to a donated food through its failure to provide proper storage, care, or
handling, the distributing agency shall,
at the Department’s option:

(1) Replace the donated food in its
distribution program in kind, or, in the
case of section 6 donated foods, where
replacement in kind may not be practicable, with other similar foods, or
(2) Pay to the Department the value
of the donated food as determined by
the Department.
Upon the happening of any event creating a claim in favor of a distributing
agency against a subdistributing agency, recipient agency, warehouseman,
carrier or other person, for the improper distribution, use, or loss of, or
damage to, a donated food, the distributing agency shall take action to obtain recovery. All amounts collected by
such action shall, at the Department’s
option, be used in accordance with the
provisions of paragraph (c)(1) of this
section, or, except for amounts collected on claims involving section 6 donated foods, shall be expended for program purposes in accordance with the
provisions of paragraph (f) of this section. Determinations by a distributing
agency that a claim has or has not
arisen in favor of the distributing agency against a subdistributing agency,
recipient agency, warehouseman, carrier or other person, shall, at the option of the Department, be approved by
the Department prior to the distributing agency taking action thereon.
Where prior approval has not been
given by the Department, a distributing agency’s claim determinations
shall be subject to review by the Department. In the case of an inventory
shortage, when the loss of any one
commodity does not exceed one percent of the total quantity of the donated food distributed or utilized from
any single storage facility during the
fiscal year in which the loss occurred,
or during the period for which an audit
was conducted by representatives of
the Department, or, if approved by
FNS, during the period for which an
audit was conducted by the distributing agency, if the distributing agency finds that: (i) The cause of the
shortage cannot be established, (ii) the
lost donated foods were held in noncommercial storage or other facilities
owned or operated by the distributing
agency, a subdistributing agency or a
recipient agency, and (iii) there is no
indication that the loss was the result

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Food and Nutrition Service, USDA

§ 250.15

of negligence or continued inefficiency
in operations, the distributing agency
need not take any further claims action, but the factual basis for not taking further claims action shall be subject to review by the Department. Furthermore, distributing agencies shall
not be required to file or pursue a
claim for a loss which does not exceed
an amount established by State law,
regulations, or procedure as a minimum amount for which a claim will be
made for State losses generally, but no
such claim shall be disregarded where
there is evidence of violation of Federal or State statutes. Distributing
agencies which fail to pursue claims
arising in their favor, or fail to provide
for the right to assert such claims, or
fail to require their subdistributing
agencies and recipient agencies to provide for such rights in accordance with
§ 250.12(b), shall be responsible to the
Department for replacing the donated
foods or paying the value thereof in accordance with the provisions of paragraph (c)(1) or (2) of this section. Distributing agencies which pursue claims
arising in their favor, but fail to obtain
full restitution shall not be liable to
the Department for any deficiency unless the Department determines that
the distributing agency fraudulently or
negligently failed to take reasonable
action to obtain restitution. The Department may, at its option, require
assignment to it of any claim arising
from the distribution of donated foods.
(d) Demurrage. Demurrage or other
charges which accrue after a car or
truck has been placed for unloading by
the delivering carrier, or which accrue
because placement of a car or truck is
prevented, shall be borne by the distributing agency, except that demurrage or other charges may be borne by
the Department where such charges accrue because of actions by the Department and without the fault or negligence of the distributing agency.
(e) Redonation expenditures. In accordance with § 250.13(g), whenever a distributing agency requests authority to
make redonation of any donated foods
and the Department requests that the
donated foods be federally inspected,
these inspections will be made at the
expense of the distributing agency.
Any donated foods which the Depart-

ment determines are acceptable for redonation shall be moved at the distributing agency’s expense to the closest
point within the FNS region in which
the State is located where it can be
utilized, or to a closer point outside
the region, if such a transfer is mutually agreed to by the Department and
the distributing agency. In those instances in which the distributing agency satisfactorily demonstrates to the
Department that the need for any redonation resulted from no fault or negligence on its part, the Department
shall assume such transportation costs
as it determines to be proper. Whenever a redonation is made at the request of the Department, the Department shall pay all transportation and
handling costs in connection with such
redonation and shall pay to the distributing agency all storage and handling
costs accrued on the donated foods at
the time of redonation, as determined
by the Department, except when the
request is made as a result of negligence on the part of the distributing
agency.
(f) Use of funds accruing in operation of
the program—(1) Funds accruing from
claims. Funds accruing from recoveries
from loss or damage claims (which are
authorized under paragraph (c) of this
section to be expended for program
purposes) shall be used only for the
payment of expenses of the food distributing program, including transportation, storage and handling or donated foods, salaries of persons directly
connected with the program, and other
administrative expenses. In accordance
with paragraph (f)(4) of this section,
the receipt and expenditure of funds so
accrued shall be reviewed by the distributing agency to determine that
fund balances are not in excess of program needs.
(2) Other funds. Funds accruing from
the sale of containers, packing materials, salvage of donated foods, distribution charges, or insurance shall be
returned to the Department or used
only for the payment of expenses of the
program which will improve program
operations including, but not limited

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§ 250.16

7 CFR Ch. II (1–1–09 Edition)

to, transportation, storage and handling of donated foods, salaries of persons directly connected with the program and other program-related expenses. Funds accruing from the collection of distribution charges which are
determined to be in excess of program
needs pursuant to paragraph (f)(4) of
this section shall be used in accordance
with that paragraph. Funds accruing
from the operation of the program
shall not be used for those costs which
are unallowable under the cost Principles in the Department’s Uniform
Federal Assistance Regulations, 7 CFR
part 3015, subpart T. These unallowable
costs include, but are not limited to:
(i) Bad debts;
(ii) Contingencies;
(iii) Contributions and donations;
(iv) Entertainment;
(v) Fines and penalties;
(vi) Governor’s expenses;
(vii) Interest and other financial
costs;
(viii) Legislative expenses; and
(ix) Losses on other grants.
(3) Segregation of funds. Distributing
agencies and subdistributing agencies
shall maintain two separate accounts
for funds accruing from program operations. Funds accruing from the collection of distribution charges shall be
maintained in an operating account.
Funds accruing from the sale of containers, salvage of foods, insurance and
recoveries of claims for the loss or
damage of donated foods shall be maintained in a salvage account.
(4) Excess funds. The distributing
agency shall review the receipt and expenditures of funds annually to ensure
that fund balances are not in excess of
program needs. At a maximum, the operating account fund shall not exceed
the sum of the previous year’s highest
three-month expenditures. Funds exceeding this maximum shall be considered in excess of program needs unless
the distributing agency provides sufficient justification as to the need for
such funds and receives approval from
the FNSRO. FNSRO may determine
that funds equal to or less than the expenditures for the previous year’s highest three months are in excess of what
is needed. In such instances, the distributing agency shall reduce the excess funds in the operating account by

reducing distributing charges or returning the funds to the contributor.
The salvage account will have no set
limit. FNSRO must, however, give
prior approval to each deposit to or expenditure from the salvage fund which
is in excess of $2,500. The distributing
agency shall impose upon subdistributing agencies and recipient agencies
similar provisions for the use of such
funds accruing from the operation of
their programs.
[53 FR 20426, June 3, 1988, as amended at 54
FR 42476, Oct. 17, 1989]

§ 250.16

Maintenance of records.

(a) General requirements. (1) Accurate
and complete records shall be maintained with respect to the receipt, distribution/use and inventory of donated
foods including:
(i) End products processed from donated foods and
(ii) The determination made as to liability for any improper distribution,
use of, loss of, or damage to, such foods
and the results obtained from the pursuit of claims by the distributing agency.
Such records shall also be maintained
with respect to the receipt and disbursement of funds arising from the operation of the distribution program, including the determination as to the
amount of payments to be made by any
processor, upon termination of processing contracts.
(2) Distributing agencies shall require all subdistributing agencies to
maintain
accurate
and
complete
records with respect to the receipt, distribution/disposal, and inventory of donated foods, including end products
processed from donated foods. Subdistributing agencies and recipient
agencies must document any funds
that arise from the operation of the
distribution program, including refunds made to recipient agencies by a
processor in accordance with § 250.30(k).
Further, these documents should allow
an independent determination of the
specific accounts that benefit from
these funds.
(3) Unless a distributing agency
maintains an offer-and-acceptance system in accordance with § 250.48(e), the

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Food and Nutrition Service, USDA

§ 250.17

distributing agency shall maintain accurate and complete records with respect to amounts and value of commodities refused by school food authorities.
School food authorities shall also be
required to maintain such records of
refusals.
(4) Each processor, food service management company, warehouse, or other
entity which contracts with a distributing agency, subdistributing agency
or recipient agency shall be required to
keep accurate and complete records
with respect to the receipt, distribution/disposal, storage and inventory of
such foods similar to those required of
distributing agencies under this paragraph. Where donated foods have been
commingled with commercial foods,
the processor shall maintain records
which permit an accurate determination of the donated-food inventory. The
processor shall also be required to keep
formula, recipes, daily or batch production records, loadout sheets, bills of
lading, and other processing and shipping records to substantiate the use
made of such foods and their subsequent redelivery, in whatever form, to
any distributing agency, subdistributing agency or recipient agency. Processors must maintain records which
will permit a determination regarding
compliance with the contracting provisions required by § 250.30(f) (3) and (4) as
well as maintain records used as the
basis for compiling the processor performance
reports
required
by
§ 250.30(m).
(5) All recipient agencies shall be required to keep accurate and complete
records showing the data and method
used to determine the number of eligible persons served by that agency.
(6) Failure by a distributing agency,
subdistributing agency, recipient agency, processor, food service management
company, warehouse or other entity to
maintain records required by this Section shall be considered prima facie
evidence of improper distribution or
loss of donated foods and the agency,
processor or entity shall be subject to
the provisions of § 250.13(e).
(b) Length of maintenance. All records
required by this Section shall be retained for a period of three years from
the close of the fiscal year to which
they pertain. However, in instances

when claims action and/or audit findings have not been resolved, the
records shall be retained as long as required for the resolution of such action
or findings.
[53 FR 20426, June 3, 1988, as amended at 67
FR 65015, Oct. 23, 2002]

§ 250.17 Reports.
(a) Inventory reports and receipt of donated foods. Distributing agencies shall
complete and submit to the FNSRO
semiannual reports regarding excessive
inventories (as defined in § 250.14(f)) of
donated foods, utilizing form FNS–155,
the Inventory Management Register,
except that distributing agencies shall
submit monthly inventory information
on form FNS–152, for the Food Distribution Program on Indian Reservations, and on form FNS–153, for the
Commodity Supplemental Food Program. FNS may require the use of
other reporting formats. FNS may also
require that form FNS–155 be submitted more frequently than semiannually if necessary to maintain program accountability, and that any inventory report be submitted less frequently if sufficient to meet program
needs. Reports shall be submitted not
later than 30 calendar days after the
last month in the reporting period as
established by FNS.
(b) Processing inventory reports. Distributing agencies shall complete and
submit a quarterly processing inventory
report
in
accordance
with
§ 250.30(o).
(c) Performance reports. Monthly reports of performance shall be submitted by processors to distributing
agencies in accordance with § 250.30(m).
(d) Commodity acceptability reports.
Distributing agencies shall submit to
the FNSRO reports relative to the
types and forms of donated foods which
are most useful to recipient agencies in
accordance with § 250.13(k) of this part.
(e) Other reports. Distributing agencies shall complete and submit other
reports relative to distribution operations in such form as may be required
from time to time by the Department.
(f) Report transmission. Where a report
is to be postmarked by a specific date
and such report is transmitted by
means of a facsimile machine, the date
printed by the facsimile machine on

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§ 250.18

7 CFR Ch. II (1–1–09 Edition)

the facsimile copy may serve as the
postmark.
(Reporting requirements contained in paragraph (a) approved by the Office of Management and Budget under control number 0584–
0001. Reporting requirements contained in
paragraph (e) approved by the Office of Management and Budget under control numbers
0584–0028, 0584–0109, 0584–0288 and 0584–0293)

cprice-sewell on PRODPC61 with CFR

[53 FR 20426, June 3, 1988, as amended at 53
FR 27476, July 21, 1988; 59 FR 62983, Dec. 7,
1994; 62 FR 53730, Oct. 16, 1997]

§ 250.18 Audits.
(a) Right of inspection and audit. The
Secretary, the Comptroller General of
the United States, or any of their duly
authorized representatives, may inspect and inventory donated foods in
storage or the facilities used in the
handling or storage of such donated
foods, and may inspect and audit all
records, including financial records,
and reports pertaining to the distribution of donated foods and may review
or audit the procedures and methods
used in carrying out the requirements
of this part at any reasonable time.
Subdistributing
agencies,
recipient
agencies, processors, food service management companies and warehouses
shall be required to permit similar inspection and audit by such entities or
their representatives. Fiscal matters
shall continue to be reviewed in audits
under the Single Audit Act (31 U.S.C.
7501–07) and the Department’s Uniform
Federal Assistance Regulations (7 CFR
part 3015).
(b) Independent CPA audits of multiState processors. (1) For any year in
which a multi-State processor receives
more than $250,000 in donated foods,
the processor shall obtain an independent CPA (certified public accountant) audit for that year. Multi-State
processors which receive $75,000 to
$250,000 in donated food each year shall
obtain an independent CPA audit every
two years and those which receive less
than $75,000 in donated foods each year
shall obtain an independent CPA audit
every three years. Those multi-State
processors which are in the two or
three-year audit cycle shall move into
the next audit cycle at the point in
time in which the value of donated
foods received reaches $75,000 or
$250,000 in any year. The total value of

donated food received shall be computed by adding the value of food received under State and National Commodity Processing contracts. In instances in which the Department determines that the audit is not acceptable
or that the audit has disclosed serious
deficiencies, the processor shall be subject to additional audits at the request
of FNS.
(2) Audits shall be conducted in accordance with the auditing provisions
set forth under the Uniform Federal
Assistance Regulations (7 CFR part
3015, subpart I) and the FNS Audit
Guide for Multi-State Processors. At
the discretion of FNS, auditors will be
required to attend training sessions
conducted by the Department.
(3) The costs of the audits, including
those costs associated with training,
shall be borne by the processors.
(4) Audit findings relative to those
elements associated with the processing of donated food shall be submitted to the processor and to FNS
concurrently.
(5) Noncompliance with the audit requirements in paragraph (b)(1) of this
section will render the processor ineligible to enter into another processing
contract with any contracting agency
until the required audit has been conducted and deficiencies corrected.
(6) Processor response. Multi-State
processors shall develop a written response to FNS addressing deficiencies
which have been identified in the audit.
Such responses shall include:
(i) Corrective action which has already been taken to eliminate the deficiency;
(ii) Corrective action which the processor proposes to take to eliminate the
deficiency;
(iii) The timeframes for the implementation and completion of the corrective action;
(iv) A determination of what caused
the deficiency; and
(v) Deficiencies which have been
identified that the processor takes exception to and an explanation for the
exception.
Multi-State processors shall submit a
written response to FNS in accordance
with timeframes established by FNS.
[53 FR 20426, June 3, 1988, as amended at 54
FR 7525, Feb. 22, 1989]

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Food and Nutrition Service, USDA

§ 250.19

§ 250.19 Reviews.
(a) General. Each distributing agency
shall establish a review system in order
to assess the effectiveness of its food
distribution program in meeting the
requirements of these regulations.
(b) Responsibilities of distributing agencies. (1) As part of its review system,
each distributing agency must establish procedures to ensure compliance
with the requirements of this part, and
with other Federal regulations, as applicable. Such procedures must include, for example, requirements relating to eligibility of recipient agencies
and recipients, ordering, storage, and
inventory of donated foods, reporting
and recordkeeping, and civil rights, as
they apply to specific programs. They
must also include:
(i) An on-site review of all charitable
institutions, or the food service management companies under contract
with them, at a minimum, whenever
the distributing agency identifies actual or probable deficiencies in the use
of donated foods by such institutions,
or by their contractors, through audits,
investigations, complaints, or any
other information.
(ii) An on-site review at least once
every 2 years of all processors except
those that are multi-State processors
as defined in § 250.3, with no fewer than
50 percent being reviewed each year;
(iii) An annual on-site review of each
storage facility utilized by the distributing agency. On-site reviews conducted by FNS may be considered as
contributing to the fulfillment of the
minimum coverage required by this
paragraph; and
(2) Each distributing agency shall design and implement a system to verify
sales of end products to all recipient
agencies under that distributing agency’s authority in instances when a
processor transfers end products to a
distributor and the distributor sells the
end product to the recipient agencies
at a discount and the distributor receives a refund from the processor. At
a minimum, such a system must:
(i) At a minimum, provide for a semiannual review of a statistically valid
sample of sales for the previous sixmonth period for all processors which
contract with the distributing agency
or contracting agencies under the au-

thority of the distributing agency, including multi-State processors. The
sample size must ensure a 95 percent
confidence level;
(ii) Support the projection of a claim
against the processor when, in the review of the sample, it is determined
that the value of donated foods has not
been passed on to recipient agencies or
when end products have been improperly distributed; and
(iii) Provide for the assessment of
claims against the processor in accordance with FNS Instruction 410–1, NonAudit Claims, Food Distribution Program, in instances when deficiences
have been identified.
(iv) Provide for the adjustment of
performance reports and processing inventory reports to refect any invalid
sales;
(v) Provide for the development and
submission by processors to the distributing agency of a corrective action
plan designed to correct problems identified during the sales verification; and
(vi) In instances in which the distributing agency has delegated the responsibility of sales verification to processors, the distributing agency must:
(A) Establish guidelines which ensure
that the criteria contained in paragraphs (b)(2)(i)-(v) are met;
(B) Ensure that processors report
their findings to the distributing agency on a semi-annaul basis in accordance with § 250.30(m);
(C) Review the processor’s findings
and select a random sub-sample of at
least 10 percent of all sales verified by
the processor and reverify the sale by
contacting the recipient agency by
telephone or through written correspondence; and
(D) Submit a copy of the processor’s
review report and findings and the results of the reverification efforts to the
appropriate FNSRO. In instances of
poor processor performance, the distributing agency shall require the processor to discontinue the abused value
pass-through-system, initiate an audit
or review to determine the extent to
which sales are to be disallowed, establish a claim, and/or terminate the contract.
(3) The distributing agency shall submit a report of review findings to each

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§ 250.20

7 CFR Ch. II (1–1–09 Edition)

cprice-sewell on PRODPC61 with CFR

entity reviewed. The report shall include:
(i) Each deficiency found;
(ii) The factors contributing to each
deficiency;
(iii) Recommendations for needed
corrective action, including timetables
for completion and/or claims action to
be pursued, if any; and
(iv) Provisions for evaluating effectiveness of corrective actions.
A copy of each processor review report
shall be provided to the appropriate
FNSRO.
(4) Distributing agencies shall monitor progress toward completion and
the effectiveness of corrective actions
taken
in
eliminating
program
deficiences.
(5) In addition to the review requirements of paragraph (b)(1) of this section, each distributing agency shall
make a continuing evaluation of all recipient agencies, and processors by
monitoring performance reports, food
requests, participation data, and data
regarding refunds and discounts to recipient agencies and distributors for
the receipt of end products.
(6) Distributing agencies shall, where
applicable, require that subdistributing
agencies monitor and review their operations in accordance with this paragraph.
(c) Corrective action plans. Corrective
action plans shall be submitted whenever a distributing agency is found by
the FNSRO to be substantially out of
compliance with a performance standard or any other provision of this part.
The corrective action plan shall identify the corrective actions and the
timeframes needed to correct the deficiencies found by the FNSRO. The plan
shall be written, signed by the proper
official in the State, and submitted to
the FNSRO within 60 days after the
distributing agency receives notification from the FNSRO of a deficiency.
Extensions beyond 60 days may be
made, for cause, with written justification to and approved by the FNSRO.
[53 FR 20426, June 3, 1988, as amended at 54
FR 7525, Feb. 22, 1989, 54 FR 25564, June 16,
1989; 54 FR 42477, Oct. 17, 1989; 62 FR 53731,
Oct. 16, 1997; 73 FR 46184, Aug. 8, 2008]

§ 250.20

Sanctions.

Any distributing agency which has
failed to comply with the provisions of
this part or any instructions or procedures issued in connection with it or
any agreements entered into pursuant
to it, may, at the discretion of the Department, be disqualified from further
participation in any distribution program. Reinstatement may be made at
the option of the Department. Disqualification shall not prevent the Department from taking other action
through other available means when
considered necessary, including prosecution under applicable Federal statutes.
§ 250.21

Civil rights.

Distributing agencies, subdistributing agencies and recipient agencies
shall comply with the Department’s
nondiscrimination regulations (7 CFR
parts 15, 15a, and 15b) and the FNS civil
rights instructions to ensure that in
the operation of the program no person
is discriminated against because of
race, color, national origin, age, sex or
handicap.
§ 250.22

Complaints.

Distributing agencies shall investigate promptly complaints received in
connection with the distribution or use
of donated foods. Irregularities which
are disclosed shall be corrected immediately. Serious irregularities shall be
promptly reported to the Department.
Distributing agencies shall maintain or
file evidence of such investigations and
actions. The Department also reserves
the right to make investigations and
shall have the final determination as
to when a complaint has been properly
handled. Complaints alleged on the
basis of race, color, national origin,
age, sex or handicap shall be handled in
accordance with § 250.21.
§ 250.23

Buy American.

(a) Purchase requirements. When purchasing food products with Federal
funds, whenever possible, recipient
agencies shall purchase only food products that are produced in the United
States (U.S.). Food products produced
in the U.S. means:

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(1) An unmanufactured food product
produced in the U.S.; or
(2) A food product manufactured in
the U.S. primarily using food grown in
the U.S.
(b) Exceptions. The purchase requirements described in paragraph (a) of
this section shall not apply in instances when the recipient agency determines: (1) Recipients have unusual
or ethnic food preferences which can
only be met through purchases of products not produced in the U.S.; (2) the
product is not produced or manufactured in the U.S. in sufficient and reasonably available quantities of a satisfactory quality; (3) the cost of U.S. produced food products is significantly
higher than foreign products, or (4) the
recipient agency is located in Alaska,
Hawaii, Guam, American Samoa, Puerto Rico, the Virgin Islands, or the Commonwealth of the Northern Mariana Islands.
[53 FR 27476, July 21, 1988, as amended at 58
FR 39122, July 22, 1993; 67 FR 65015, Oct. 23,
2002]

cprice-sewell on PRODPC61 with CFR

§ 250.24 Distributing agency performance standards.
This section establishes basic performance standards which must be followed by distributing agencies responsible for intrastate distribution of donated commodities and products. The
seven standards address the level of
service that shall be provided to recipient agencies. The basic standards include the following:
(a) Program management and evaluation. Distributing agencies shall conduct reviews in accordance with
§ 250.19. Distributing agencies shall also
assess the adequacy of the service provided to recipient agencies.
(b) Information dissemination. Distributing agencies shall provide recipient
agencies with all information needed
for informed participation in the program. Distributing agencies shall provide program information relative to:
(1) Current program regulations,
(2) Summaries of commodity specifications upon request (§ 250.13(j)) and
commodity fact sheets,
(3) Results of any test evaluations
and surveys,
(4) Recipes, and

(5) Written procedures for ordering
commodities, handling commodities
which are stale, spoiled, out-of-condition or not in compliance with specifications (including procedures for replacement by the Department under
§ 250.13(g)), submitting complaints and
other written policy which affects program operations.
(c) Fiscal responsibility. Distributing
agencies shall maintain a financial
management system which ensures fiscal integrity and accountability for all
funds and includes a recordkeeping system which conforms to generally accepted accounting practices. Distributing agencies shall submit information relative to distribution charges to
FNS in accordance with § 250.15(a).
(d) Ordering and allocation. Distributing agencies shall ensure that donated food is provided on an equitable
basis and, to the extent practicable, in
the types and forms most usable by recipient agencies. Distributing agencies
shall be responsible for:
(1) Obtaining and utilizing commodity acceptability information in
accordance with § 250.13(k);
(2) Providing recipient agencies with
information
regarding
commodity
availability;
(3) Providing recipient agencies with
information regarding commodity assistance levels;
(4) Ordering and allocating donated
food based on participation data for
those programs which serve meals;
(5) Ensuring the availability of commodities, to the extent possible, in
quantities requested and at times specified by recipient agencies;
(6) Permitting recipient agencies to
refuse all or a portion of a commodity
prior to delivery to the distributing
agency if time permits;
(7) Permitting recipient agencies to
change orders for Group B (grain,
dairy, peanut and oil products) and unlimited bonus commodities prior to
submission of an order to the Department;
(8) Providing recipient agencies with
ordering options and commodity values, and considering the specific needs
and capabilities of such agencies in ordering donated foods;

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(9) Offering school food authorities
participating in NSLP, or as commodity schools, the commodity offer
value of donated food assistance, at a
minimum, and determining an adjusted
assistance level in consultation with
school food authorities, as appropriate,
in accordance with § 250.58; and
(10) Ensuring that all school food authorities in NSLP are aware of the full
list of available donated foods, have
the opportunity to provide input at
least annually in determining the donated foods from the full list that they
may select for their food service, and
receive all such selected donated foods
that may be cost-effectively distributed to them.
(e) Warehousing and distribution. Distributing
agencies
shall
use
a
warehousing and distribution system
that is efficient, cost effective and responsive to needs of recipient agencies
in accordance with § 250.14(a). In addition, distributing agencies shall:
(1) Work with recipient agencies capable of receiving direct shipments to
order donated food directly into their
warehouses;
(2) Solicit information and recommendations regarding the individual
delivery needs of recipient agencies;
(3) Maintain distribution schedules
which are equitable and reliable, recognize hours of operation, holidays and
vacations and other special needs of recipient agencies;
(4) And make donated food available
at least monthly to all recipient agencies except those that have agreed to
less frequent deliveries (§ 250.13(a)(6));
however, the distributing agency shall
not be held liable for delays in deliveries of donated food when such delays
are due to late deliveries of donated
food to the distributing agency by the
Department.
(f) Disposition of damaged or out-ofcondition
commodities.
Distributing
agencies shall establish a system for
handling recipient agency complaints,
notifying the Department of any commodity losses in accordance with
§ 250.13(f) and arranging for the replacement of lost commodities in accordance with § 250.13(g).
(g) Processing. Distributing agencies
shall administer an acceptable processing program in accordance with

§ 250.30. In addition, distributing agencies shall inform recipient agencies annually of processing options available
to them in facilitating participation in
State or National processing contracts.
Prior to entering into a processing contract, distributing agencies shall test
end products. The end product testing
may be delegated to the purchasing recipient agency provided that test results are reviewed by the distributing
agency. Distributing agencies shall
monitor the acceptability of processed
end
products
as
required
in
§ 250.30(b)(1).
[54 FR 42477, Oct. 17, 1989, as amended at 62
FR 53731, Oct. 16, 1997; 64 FR 72902, Dec. 29,
1999; 73 FR 46184, Aug. 8, 2008]

Subpart C—Processing and
Labeling of Donated Foods
§ 250.30 State processing of donated
foods.
(a) General. This section sets forth
the terms and conditions under which
distributing agencies, subdistributing
agencies, or recipient agencies may
enter into contracts for the processing
of donated foods and prescribes the
minimum requirements to be included
in such contracts.
(b) Permissible contractual arrangements. (1) A distributing agency, subdistributing agency, or recipient agency may contract for processing, pay
the processing fee, and deliver the end
products to eligible recipient agencies
through its own distribution system.
Distributing agencies shall assure that
the acceptability of processed end
products is tested with recipient agencies eligible to receive them prior to
entering into a processing contract and
shall develop a system for monitoring
product
acceptability.
Distributing
agencies may exempt end products
from testing if they have been used
previously, have been determined by
the distributing agency to be acceptable by recipient agencies, and have
had no changes in specifications.
(2) A distributing agency or subdistributing agency may contract for
processing on behalf of one or more recipient agencies. All recipient agencies
eligible to receive the donated foods to
be processed may receive end products
made from those foods and produced

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under such processing contracts by virtue of the distributing agency—recipient agency agreement required by
§ 250.12(b). Under this arrangement and
subject to the approval of the distributing agency:
(i) Processors shall utilize either a
discount or a refund system as defined
in § 250.3 when they sell end products
directly to recipient agencies, or
(ii) When selling end products
through a distributor, such sales shall
be in accordance with paragraph (e) of
this section.
(3) Distributing agencies shall permit
subdistributing agencies and recipient
agencies to enter into processing contracts with a processor under arrangements similar to those described in
paragraph (b) (1) or (2) of this section.
(c) Requirements for processing contracts. (1) Contracts with processors
shall be in a standard written form and
shall be reviewed by the appropriate
FNSRO. Processing contracts shall terminate on June 30 of each year. However, processing contracts may give
contracting agencies the option of extending contracts for two 1-year periods, provided that any changed information must be updated before any
contract extension is granted, including the information in paragraphs
(c)(3), (c)(4)(ii), and (c)(4)(viii)(B) of this
section. The processor must have performed to the satisfaction of the contracting agency during the previous
contract year, submitted all required
reports and any corrections to such reports up to the time that contract extension occurs, and submitted its certified public accountant report as required under paragraph (c)(4)(xi) of this
section before the contract may be extended. Distributing agencies shall develop criteria for use in evaluating and
selecting processing contracts. The selection criteria shall be used in selecting or rejecting processors in a manner
that ensures equitable treatment of
processors. The selection criteria shall,
at a minimum, include:
(i) The nutritional contribution
which the end product will provide;
(ii) The marketability of the end
product;
(iii) The distribution method which
the processor intends to utilize;
(iv) Price and yield schedule data;

(v) Any applicable labeling requirements; and
(vi) The ability of the processor to
meet the terms and conditions set
forth in the regulations.
These criteria will be reviewed by the
appropriate FNSRO during the management evaluation review of the distributing agency. Distributing agencies
and subdistributing agencies which
enter into contracts on behalf of recipient agencies but which do not limit the
types of end products which can be sold
or the number of processors which can
sell end products within the State are
not required to follow the selection criteria. In addition to utilizing these selection criteria, when a contracting
agency enters into a contract both for
the processing of donated food and the
purchase of the end products produced
from the donated food, the procurement standards set forth in Attachment O to OMB Circular A–102 must be
followed. Recipient agencies which purchase end products produced under
Statewide agreements are also required
to comply with Attachment O of OMB
Circular A–102. Contracting agencies
shall not enter contracts with processors which cannot demonstrate the
ability to meet the terms and conditions of the regulations and the distributing agency agreements; furnish prior
to the delivery of any donated foods for
processing, a performance bond, an irrevocable letter of credit or an escrow
account in an amount sufficient to protect the contract value of donated food
on hand and on order; demonstrate the
ability to distribute end products to eligible recipient agencies; provide a satisfactory record of integrity, business
ethics and performance and provide
adequate storage.
(2) Standard form contracts shall be
prepared or reviewed by the appropriate State legal staff to assure conformity with the requirements of these
regulations and of applicable Federal,
State and local laws.
(3) The contract shall be signed for
the processor by the owner, a partner,
or a corporate officer duly authorized
to sign the contract, as follows:
(i) In a sole proprietorship, the owner
shall sign the contract;
(ii) In a partnership, a partner shall
sign the contract;

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(iii) In a corporation, a duly authorized corporate officer shall sign the
contract.
(4) At a minimum, each processing
contract shall include:
(i) The names and telephone numbers
of the contracting agency and processor;
(ii) A description of each end product,
the quantity of each donated food and
the identification of any other ingredient which is needed to yield a specific number of units of each end product (except that the contracting agency may permit the processor to specify
the total quantity of any flavorings or
seasonings which may be used without
identifying the ingredients which are,
or may be, components of flavorings or
seasonings), the total weight of all ingredients in the batch formula, the
yield factor for each donated food, and
any pricing information provided by
the processor in addition to that required in paragraph (c)(4)(iii) of this
section as requested by the contracting
agency and a thorough explanation of
what this additional pricing information represents. The yield factor is the
percentage of the donated food which
must be returned in the end product to
be distributed to eligible recipient
agencies. For substitutable donated
foods, at least 100 percent of the donated food provided to the processor
must be physically contained in the
end products with no allowable tolerance;
(iii) The contract value of each donated food to be processed and, where
processing is to be performed only on a
fee-for-service basis as defined in
§ 250.3, the fee-for-service;
(iv) A provision for:
(A) Termination of the contract upon
thirty days written notice by the contracting agency or the processor and
(B) Immediate termination of the
contract when there has been noncompliance with its terms and conditions by the contracting agency or the
processor;
(v) In the event of contract termination, a provision for disposition of
donated foods and end products in the
processor’s inventories or payment of
funds in accordance with paragraph (j)
of this section;

(vi) A provision for inspection and
certification during processing, where
applicable, by the appropriate acceptance service in accordance with paragraphs (g) and (h) of this section;
(vii) A provision that end products
containing donated foods that are not
substitutable under paragraph (f) of
this section shall be delivered only to
eligible recipient agencies and that end
products containing both substitutable
and non-substitutable donated foods
may be delivered and sold in accordance with the requirements of paragraph (d) and (e) of this section;
(viii) Provisions that the processor
shall:
(A) Fully account for all donated
foods delivered into its possession by
production and delivery to the contracting agency or eligible recipient
agencies of an appropriate number of
units of end products meeting the contract specifications, and where end
products are sold through a distributor, that the processor remains
full accountable for the donated foods
until refunds or any other credits equal
to their contracted value have been
made to eligible recipient agencies in
accordance with paragraph (k) of this
section or to distributing agencies in
accordance with paragraph (n)(2) of
this section;
(B) Furnish to the contracting agency prior to the delivery of any donated
foods for processing documentation
that a performance supply and surety
bond from a surety company listed in
the most recent U.S. Department of
Treasury Circular 570, an irrevocable
letter of credit or an escrow account
has been obtained in an amount that is
sufficient to protect the contract value
of all donated foods. Since the distributing agency is held liable by FNS for
any donated foods provided to a processor the distributing agency shall determine the dollar value of the performance supply and surety bond, irrevocable letter of credit or the escrow
account taking into consideration the
(1) Value of donated foods on hand;
(2) Value of donated foods on order
and
(3) Anticipated usage rate during the
contract period;
(C) Use or dispose of the containers
in which donated foods are received

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from the Department in accordance
with the instructions of the contracting agency;
(D) Apply as credit against the processing fee or return to the contracting
agency and identify:
(1) Any funds received from the sale
of containers, and
(2) The market value or the price received from the sale of any by-products
of donated foods or commercial foods
which have been substituted for donated foods;
(E) Substitute donated foods with
commercially purchased foods only in
accordance with paragraph (f) of this
section;
(F) Meet the requirements of paragraph (i) of this section for labeling end
products;
(G) Maintain accurate and complete
records pertaining to the receipt, disposal, and inventory of donated foods
in accordance with § 250.16;
(H) Submit processing performance
reports in accordance with paragraph
(m) of this section; and
(I) Submit annual reconciliation reports and make payments to distributing agencies for any inventory remaining at the termination of the contract in accordance with paragraph
(n)(3) of this section.
(ix) A provision that approval of the
contract by distributing agency shall
not obligate that agency or the Department to deliver donated foods for processing;
(x) A description of the processor’s
quality control system and assurance
that an effective quality control system will be maintained for the duration of the contract;
(xi) In instances when the processor
is a multi-State processor as defined in
§ 250.3, a provision that the processor
agrees to obtain an independent audit
by a certified public accountant in accordance with § 250.18(b);
(xii) A requirement that inventory
drawdowns shall be limited to the actual amount of donated foods contained in the end product. Additional
commodity required to account for production loss shall be obtained from
non-donated foods;
(xiii) A provision that the fee-forservice or value pass-through system
to be used for the sale of end products

to recipient agencies shall be described
and be consistent with paragraphs (d)
and (e) of this section.
(xiv) In instances when the distributing agency has delegated the responsibility for sales verification for end
products provided by a distributor to
recipient agencies at a discount, assurance that the processor will submit
sales verification data to the distributing agency in accordance with
§ 250.30(m)(l); and
(xv) A provision that the contracting
agency shall give the processor a list of
all recipient agencies eligible to purchase end products under the contract
and provide updates for any changes
which occur during the contract period.
(xvi) A provision that the processor
shall not assign the processing contract or delegate any aspect of processing under a subcontract or other arrangement without the written consent
of the contracting agency and the distributing agency.
(xvii) A provision that the processor
shall provide pricing information summaries and updated pricing information summaries as required in paragraphs (d)(3) and (e)(2) of this section.
(xviii) A provision that the processor
shall maintain documentation which
demonstrates that the level of the
processor’s commercial production has
not been reduced, as required in paragraph (f)(1)(iii) of this section.
(d) End products sold by processors. (1)
When recipient agencies pay the processor for end products, such sales shall
be under:
(i) A refund system as defined in
§ 250.3 and in accordance with paragraph (k) of this section; or
(ii) A discount system which provides
the price of each unit of end product
purchased by eligible recipient agencies to be discounted by the stated contract value of the donated foods contained therein; or
(iii) An alternative value passthrough system under which the value
of the donated food contained in each
unit of end product shall be passed to
the recipient agency and which has
been approved by FNS at the request of

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the distributing agency. Any alternative value pass-through system approved under this paragraph must comply with the sales verification requirements specified in § 250.19(b) of this
part, or an alternative verification system approved by FNS. The Department
retains the authority to inspect and review all pertinent records including
records pertaining to the verification
of a statistically valid sample of sales.
FNS may consider the paperwork and
resource burden associated with alternative value pass-through systems
when considering approval and reserves
the right to deny the approval of systems which are labor-intensive and
provide no greater accountability than
those systems permitted under paragraphs (d) and (e) of this section.
(2) When a processor delivers end
products produced under a fee-for-service contract, the processor shall separately identify on the bill for the recipient agency the agreed-upon fee-forservice and any delivery costs.
(3) Processors shall provide pricing
information summaries to contracting
agencies and contracting agencies shall
provide this information to recipient
agencies as soon as possible after contract approval. If this pricing information changes during the contract period, processors shall provide updated
pricing information to the contracting
agency 30 days prior to the effective
date of the change, which, in turn,
shall provide this updated information
to eligible recipient agencies.
(e) End products sold by distributors.
(1) When a processor transfers end
products to a distributor for delivery
and sale to recipient agencies, such
sales shall be under:
(i) A refund system as defined in
§ 250.3 and in accordance with paragraph (k) of this section; or
(ii) A hybrid system which provides a
refund for the contract value of the donated food shall be provided to the distributor in accordance with paragraph
(k) of this section and the price of each
unit of end product purchased by eligible recipient agencies through a distributor shall be discounted by the contract value of the donated foods contained therein; or
(iii) An alternative value passthrough system under which the con-

tract value of the donated food contained in each unit of end product shall
be passed on to the recipient agency
and which has been approved by FNS in
accordance with paragraph (d)(1)(iii) of
this section; or
(iv) When a processor arranges for delivery of processed end products produced under fee-for-service contracts
by distributors, the products shall be
delivered and invoiced using one of the
following procedures:
(A) The recipient agency is billed by
the processor for the fee-for-service
and the distributor bills the recipient
agency for the storage and delivery of
the end products; or
(B) The processor arranges for the delivery of end products through a distributor on behalf of the recipient
agency. In this system, the processor’s
invoice must include both the fee-forservice and the distributor’s charges as
separate, clearly identifiable charges.
(2) Processors shall provide pricing
information summaries to contracting
agencies and contracting agencies shall
provide this information to recipient
agencies as soon as possible after contract approval. If this pricing information changes during the contract period, the processor shall provide updated pricing information to the contracting agency, which, in turn, shall
provide this information to the eligible
recipient agencies.
(f) Substitution of donated foods with
commercial foods. (1) The processing
contract may provide for substitution
of donated foods as defined in § 250.3 except that donated beef and donated
pork shall not be substitutable. Any
substitution of commercial product for
commodities other than beef, pork, or
poultry is subject to a 100–percent yield
requirement. Under the 100–percent
yield requirement, the processor is responsible for any manufacturing losses.
(i) All components of commercial
foods substituted for any donated food
must be of U.S. origin and identical or
superior in every particular of the donated food specification. Records must
be maintained to allow independent
verification that the substituted food
meets the above condition.
(ii) Poultry shall be eligible for limited substitution. Any processors that
wish to substitute poultry must have a

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plan approved by both FNS and AMS.
Only bulk pack chicken, chicken parts,
and bulk pack turkey delivered by
USDA vendors to the processor are eligible for substitution. No backhauled
poultry product may be substituted.
(Backhauled product is typically cutup frozen poultry parts delivered to
schools that may be turned over to
processors for further processing at a
later time.) Should a processor want to
amend its approved plan, it shall submit any amendments to USDA for approval prior to implementing such
amendments.
(A) Substitution of commercial poultry may occur in advance of the actual
receipt of the donated poultry by the
processor. Should a processor choose to
use the substitution option prior to the
commodity being purchased by the
USDA, the processor shall assume all
risks. Any donated poultry not used in
end products because of substitution
shall only be used by the processor at
one of its facilities in other commercially processed products and cannot be
sold as an intact unit. However, in lieu
of processing the donated poultry, the
processor may use the commodity
product to fulfill other USDA contracts
awarded for delivery to another processor provided all terms of the other
contract are met. Any variation between the amount of commercial poultry substituted and the amount of donated poultry received by the processor
shall be adjusted according to guidelines furnished by USDA.
(B) The substitution plan shall contain a step-by-step description of how
production will be monitored; a complete description of the records that
will be maintained for the commercial
poultry substituted for the donated
poultry and the disposition of the donated poultry delivered; and how the
substitution will be tracked for the
purpose of monthly reporting to the
State distributing agencies. Poultry
substitution shall not be subject to the
100-percent yield requirement; however, the AMS Grading Service must
verify processing yields. Should a processor choose to have all production of a
specific end product, identified by
name and product code, produced under
AMS grading, then the label ‘‘Contains
Commodities Donated by the United

States Department of Agriculture. This
Product Shall Only Be Sold to Eligible
Recipient Agencies’’ shall not be required. Finished poultry end products
that have not been produced under
AMS grading supervision may not be
substituted for finished commodity end
products.
(iii) Processors shall maintain documentation that they have not reduced
their level of commercial production
because of participation in the State
processing program.
(2) Documentation must be maintained by both parties in accordance
with § 250.16. Where commercial food is
authorized to be substituted for any
donated, the processor shall maintain
records to substantiate that it continues to acquire on the commercial
market sufficient purchases of substitutable food for commercial production
and any amounts necessary to meet
the 100 percent yield requirement.
When there is substitution, the donated foods shall be used by the processor and shall not otherwise be sold or
disposed of in bulk form. The applicable Federal acceptance service shall,
upon request by the Department, the
contracting agency or the distributing
agency determine if the quality analysis meets the requirements set forth
in the original USDA procurement
specification and, in the case of concentrated skim milk replacing donated
nonfat dry milk, determine if the concentrated skim milk contains the
amount of milk solids as specified in
the contract. When donated foods are
nonsubstitutable, the applicable Federal acceptance service shall ensure
against unauthorized substitutions,
and verify that quantities of donated
foods used are as specified in the contract.
(3) When concentrated skim milk is
used to replace donated nonfat dry
milk, the contract shall also specify (in
addition to the requirements in paragraph (c) of this section):
(i) The percent of milk solids that, at
a minimum, must be contained in the
concentrated skim milk;
(ii) The weight ratio of concentrated
skim milk to donated nonfat dry milk;
(A) The weight ratio is the weight of
concentrated skim milk which equals

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one pound of donated nonfat dry milk,
based on milk solids;
(B) In calculating this weight, nonfat
dry milk shall be considered as containing 96.5 percent milk solids;
(C) If more than one concentration of
concentrated skim milk is to be used, a
separate weight ratio must be specified
for each concentration;
(iii) The processor’s method of
verifying that the milk solids content
of the concentrated skim milk is as
stated in the contract;
(iv) A requirement that inventory
drawdowns of donated nonfat dry milk
shall be limited to an amount equal to
the amount of concentrated skim milk,
based on the weight ratio, used to
produce the end product;
(v) A requirement that the contract
value of donated food for a given
amount of concentrated skim milk
used to produce an end product is the
value of the equivalent amount of nonfat dry milk, based on the weight ratio
of the two foods;
(vi) A requirement that the concentrated skim milk shall be produced
in a USDA approved plant or in a plant
approved by the appropriate regulatory
authority for the processing of Grade A
milk products; and
(vii) A requirement that documentation sufficient to substantiate compliance with the contract provisions shall
be maintained in accordance with
§ 250.16(a)(4).
(4) Title to the substituted food shall
transfer to the contracting agency
upon the initiation of the processing of
the end product containing the substituted food. Title to the equivalent
amount of donated food shall transfer
to the processor at the same time (except when the substitution is necessary
to meet the 100 percent yield requirement or to otherwise replace missing
or out-of-condition donated food). As
with the processing of donated poultry
into end products, AMS graders must
monitor the processing of any substituted commercial poultry to ensure
that program integrity is maintained.
Once title has transferred, the processor shall use the substituted food in
accordance with the terms and conditions of this part.
(g) Meat and poultry inspection programs. When donated meat or poultry

products are processed or when any
commercial meat or poultry products
are incorporated into an end product
containing one or more donated foods,
all of the processing shall be performed
in plants under continuous Federal
meat or poultry inspection, or continuous State meat or poultry inspection
in States certified to have programs at
least equal to the Federal inspection
programs. In addition to FSIS inspection, all donated meat and poultry
processing shall be performed under
AMS acceptance service grading. The
cost of this service shall be borne by
the processor. In the event the processor can demonstrate that grading is
impractical, exemptions in the use of
acceptance services shall be approved
by the distributing agency prior to
processing each order. Exemptions in
the use of acceptance service graders
will be authorized on the basis of each
order to be processed provided the
processor can demonstrate:
(1) That even with ample notification
time, the processor cannot secure the
services of a grader,
(2) That the cost for a grader would
be unduly excessive relative to the
value of foods being processed and that
production runs cannot be combined or
scheduled to enable prorating of the
costs of services among the purchasers
of end products, or
(3) The documented urgency of the
recipient agency’s need for the end
product precludes the use of acceptance
services.
Prior to approving a processor’s request to waive the acceptance service
requirement the distributing agency
shall ensure, based on the processor’s
past performance, that the quality of
the end product produced will in no
way be adversely affected as a result of
waiving the requirement.
(h) Certification by acceptance service.
(1) All processing activities of donated
foods shall be subject to review and
audit by the Department, including the
applicable Federal acceptance service.
The contracting agency may also require acceptance and certification by
such acceptance service in addition to
the requirements set forth in paragraph (g) of this section.

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(2) In the case of substitutable donated foods, in deciding whether to require acceptance and certification, the
contracting agency should consider the
dollar value of the donated foods delivered to the processor.
(3) When contracting agencies require
certification in accordance with paragraph (h) (1) or (2) of this section, the
degree of acceptance and certification
necessary under the processing contract shall be determined by the appropriate Federal acceptance service after
consultation with the distributing
agency concerning the type and volume
of the donated foods and anticipated
value of end products to be processed.
The cost of this service shall also be
borne by the processor.
(i) Labeling end products. (1) Except
when end products contain donated
foods that are substituted under paragraph (f) of this section, the exterior
shipping containers of end products
and, where practicable, the individual
wrappings or containers of end products, shall be clearly labeled ‘‘Contains
Commodities Donated by the United
States Department of Agriculture. This
Product Shall Be Sold Only to Eligible
Recipient Agencies.’’
(2) Labels on all end products shall
meet applicable Federal labeling requirements.
(3) When a processor makes any
claim with regard to an end product’s
contribution toward meal requirements
of any child nutrition program, the
processor shall follow procedures established by FNS, the Food Safety and
Inspection Service of the Department,
the National Marine Fisheries Service
of the U.S. Department of Commerce or
other applicable Federal agencies for
approval of such labels.
(j) Termination of processing contracts.
(1) When contracts are terminated or
completed and the processor has commodities remaining in inventory, the
processor shall be directed, at the option of the distributing agency and the
FNSRO, to do the following:
(i) With respect to nonsubstitutable
commodities, the processor shall:
(A) Return the commodities to the
contracting agency;
(B) Pay the contracting agency for
the commodities based on the Department’s replacement costs, determined

by using the most recent data provided
by the Department; or
(C) Pay the contracting agency for
the commodities based on the contract
value stated in the processor’s contract;
(D) Pay the contracting agency the
CCC unrestricted sales price;
(ii) With respect to substitutable
commodities, the processor shall:
(A) With the concurrence of any affected contracting agencies, transfer
the donated foods to the accounts of
other contracting agencies with which
the processor has contracts;
(B) Return the foods donated to the
contracting agency;
(C) Replace the commodities with the
same foods of equal or better quality as
certified in accordance with paragraph
(f)(2) of this section and deliver such
foods to the contracting agency;
(D) Pay the contracting agency for
the commodities based on the Department’s replacement costs, determined
by using the most recent data provided
by the Department; or
(E) Pay the contracting agency for
the commodities based on the contract
value stated in the processor’s contract.
(F) Pay the contracting agency the
CCC unrestricted sales price.
(2) When a processor’s contract is terminated at the processor’s request or
due to noncompliance or negligence on
the part of the processor and commodities remaining in the processor’s inventory are transported pursuant to
paragraph (j)(1)(i)(A), (j)(1)(ii)(B) or
(j)(1)(ii)(C) of this section, the processor shall pay the transportation
costs.
(3) Funds received by distributing
agencies upon termination of contracts
shall be used in accordance with FNS
Instruction 410–1, Non-Audit Claims,
Food Distribution Program.
(k) Refund payments. (1) When end
products are sold to recipient agencies
in accordance with the refund provisions of paragraph (d) or (e) of this section, each recipient agency shall submit refund applications to the processor within 30 days from the close of
the month in which the sales were
made, except that recipient agencies
may submit refund applications to a
single processor on a Federal fiscal

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§ 250.30

7 CFR Ch. II (1–1–09 Edition)

quarterly basis if the total anticipated
refund due for all purchases of product
from that processor during the quarter
is 25 dollars or less.
(2) In instances when refunds are to
be provided to distributors which have
sold end products to recipient agencies
at a discount, distributors shall submit
refund applications to processors within 30 days from the close of the month
in which the sales were made of the
date of sale to recipient agencies in
order to receive benefits.
(3) Not later than 30 days after receipt of the application by the processor, the processor shall make a payment to the recipient agency or distributor equal to the stated contract
value of the donated foods contained in
the purchased end products covered by
the refund application, except that
processors may group together refund
applications for a single recipient
agency on a Federal fiscal quarterly
basis if the total anticipated refund
due that recipient agency during the
quarter is 25 dollars or less. Copies of
requests for refunds and payments to
recipient agencies and/or distributors
shall be forwarded to the appropriate
distributing agency by the processor.
(l) Contract approvals. Distributing
agencies shall review and approve processing contracts entered into or renewed by subdistributing and recipient
agencies prior to the delivery of commodities for processing under such contracts. The distributing agency which
enters into or approves a processing
contract shall provide a copy of the
contract and of these regulations to
the processors, forward a copy of the
contract to the appropriate FNSRO,
and retain a copy for its files.
(m) Performance reports. (1) Processors
shall be required to submit to distributing agencies monthly reports of performance under each processing contract with year-to-date totals. Processors contracting with agencies other
than a distributing agency shall submit such reports to the distributing
agency having authority over that particular contracting agency. Performance reports shall be postmarked no
later than the final day of the month
following the reporting period; however, the final performance report for
the contract period shall be post-

marked no later than 60 postmarked
days from the close of the contract
year. The report shall include:
(i) A list of all recipient agencies purchasing end products under the contract;
(ii) Donated-food inventory at the beginning of the reporting period;
(iii) Amount of donated foods received during the reporting period;
(iv) Amount of donated foods transferred to and/or from existing inventory;
(v) Number of units approved end
products delivered to each eligible recipient agency during the reporting period and the number of pounds of each
donated food represented by these delivered end products;
(vi) Donated food inventory at the
end of the reporting period;
(vii) [Reserved]
(viii) In instances in which sales
verification has been delegated to the
processor pursuant to § 250.19(b)(2),
sales verification findings shall be reported as an attachment to the December and June performance reports in
whatever format the State distributing
agency deems necessary.
(ix) A certification statement that
sufficient donated foods are in inventory or on order to account for the
quantities needed for production of end
products for State processing contracts
and that the processor has on hand or
on order adequate quantities of foods
purchased commercially to meet the
processor’s production requirements
for commercial sales.
(2) In addition to reporting the information identified in paragraph (m)(1)
of this section, processors which substitute concentrated skim milk for donated nonfat dry milk shall also report
the following information for the reporting period:
(i) The number of pounds of nonfat
dry milk used in commercial products
sold to outlets which are not recipient
agencies; and
(ii) The number of pounds of concentrated skim milk, and the percent
of milk solids contained therein, used
in end products sold to recipient agencies.
(3) Distributing agencies shall review
and analyze reports submitted by processors to ensure that performance

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§ 250.30

under each contract is in accordance
with the provisions set forth in this
section.
(n) Inventory controls. (1) Distributing
agencies shall monitor processor inventories to ensure that the quantity of
donated foods for which a processor is
accountable is the lowest cost-efficient
level but in no event more than a sixmonth supply based on the processor’s
average monthly usage, unless a higher
level has been specifically approved by
the distributing agency on the basis of
a written justification submitted by
the processor. Under no circumstances
should the amount of donated foods ordered by the contracting agency for
processing purposes be in excess of anticipated usage or beyond the processor’s ability to accept and store the
donated foods at any one time. Distributing agencies shall make no further
distribution to processors whose inventories exceed these limits until such inventories have been reduced.
(2) For processors substituting concentrated skim milk for donated nonfat dry milk, distributing agencies
shall review the processors’ monthly
performance reports to ensure that:
(i) Donated nonfat dry milk inventory is being drawn down based on the
amount of milk solids contained in the
concentrated skim milk which was
used in end products sold to eligible recipient agencies;
(ii) An amount of milk solids equivalent to the amount in the donated nonfat dry milk is contained in end products sold to eligible recipient agencies;
and
(iii) Donated nonfat dry milk is not
being sold in bulk form.
(3) The last monthly performance report for the contract period, as required in paragraph (m)(1) of this section, shall serve as the annual reconciliation report. As a part of the annual reconciliation, a processor which
has entered into a contract with the
contracting agency for the next year
shall pay the distributing agency, at
the contract value, for any donated
food inventory held which is in excess
of the inventory level which has been
approved by the State distributing
agency. A processor whose contract has
been completed or terminated shall re-

turn or pay for commodities as required by subsection (j).
(4) Distributing agencies shall certify
the accuracy of the annual reconciliation report and forward it to the FNS
Regional Office. Such report shall be
postmarked no later than 90 days following the close of the contract year.
All monies shall be used in accordance
with FNS Instruction 410–1, Non-Audit
Claims, Food Distribution Program.
(5) Distributing agencies shall not
submit food requisitions for processors
reporting no sales activity during the
prior year’s contract period unless documentation is submitted by the processor which outlines specific plans for
product promotion or sales expansion.
(o) Processing inventory reports. (1)
Distributing agencies shall forward to
the FNS Regional Office the inventory
summary portion of the monthly performance report submitted by the processors in accordance with paragraph
(m)(1) of this section for the last month
of each Federal fiscal quarter. Such reports shall be postmarked no later
than 60 days following the close of each
Federal fiscal quarter, except that such
reports shall be postmarked no later
than 90 days following the close of the
contract year.
(2) In addition to the reporting requirements in paragraph (o)(1) of this
section, for each processor which substitutes concentrated skim milk for
donated nonfat dry milk the distributing agency shall also report the following information for the reporting
period:
(i) The number of pounds of nonfat
dry milk used in commercial products
sold to nonprogram outlets; and
(ii) The number of pounds of concentrated skim milk and the percent of
milk solids contained therein used in
end products sold to recipient agencies.
(p) Cooperation with administering
agencies for child nutrition programs. If
the distributing agency which enters
into or approves contracts for end
products to be used in a child nutrition
program does not also administer such
program, it shall collaborate with the
administering agency by;
(1) Giving that agency an opportunity to review all such contracts to
determine whether end products to be

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§ 250.50

7 CFR Ch. II (1–1–09 Edition)

provided contribute to required nutritional standards for reimbursement
under the applicable regulations for
such program (7 CFR parts 210, 225, and
226) or are otherwise suitable for use in
such program;
(2) Consulting with the agency with
regard to the labeling requirements for
the end products; and
(3) Otherwise requesting technical assistance as needed from that agency.
(q) FNSRO review of contracts and inventory reports. The FNSRO shall:
(1) Review all processing contracts
and provide guidance, including written recommendations for termination,
where necessary, to distributing agencies concerning any contracts which do
not meet the requirements of this section;
(2) Allow distributing agencies 30
days to respond to any recommendation concerning contracts not meeting
the requirements of this section;
(3) Review and analyze the processing
inventory reports required by paragraph (o) of this section to ensure that
no additional donated foods shall be
distributed to processors with excess
inventories until such inventories have
been reduced;
(4) Assist distributing agencies in reducing such inventories; and
(5) Review annual reconciliation reports required by paragraph (n) of this
section and ensure that payments for
commodities have been made.
(r) Availability of copies of processing
contracts. Contracts entered into in accordance with this Section are public
records and FNS will provide copies of
such contracts to any person upon request. The FNSRO will retain copies of
processing contracts submitted by distributing agencies for a period of three
years from the close of the Federal fiscal year to which they pertain.
(s) Processing activity guidance. Distributing agencies shall develop and
provide a processing manual or similar
procedural material for guidance to
contracting agencies, recipient agencies, and processors. Distributing agencies must revise these materials as necessary to reflect policy and regulatory
changes. This guidance material shall
be provided to contracting agencies, recipient agencies and processors at the
time of the approval of the initial

agreement by the distributing agency,
when there have been regulatory or
policy
changes
which
necessitate
changes in the guidance materials, and
upon request. The manual shall include, at a minimum, statements of the
distributing agency’s policies and procedures on (1) contract approval, (2)
monitoring and review of processing
activities, (3) recordkeeping and reporting requirements, (4) inventory
controls, and (5) refund applications.
(t) Waiver authority. The Food and
Nutrition Service may waive any of the
requirements contained in this part for
the purpose of conducting demonstration projects to test program changes
designed to improve the State processing of donated foods.
(Approved by the Office of Management and
Budget under control number 0584–0007)
[53 FR 20226, June 3, 1988, as amended at 53
FR 20598, June 6, 1988; 53 FR 27476, July 21,
1988; 53 FR 46080, Nov. 16, 1988; 54 FR 7525,
Feb. 22, 1989; 54 FR 25564, June 16, 1989; 58 FR
39122, July 22, 1993; 59 FR 62984, Dec. 7, 1994;
61 FR 5272, Feb. 12, 1996; 67 FR 65015, Oct. 23,
2002]

Subpart D—Donated Foods in
Contracts with Food Service
Management Companies
SOURCE: 73 FR 46185, Aug. 8, 2008, unless
otherwise noted.

§ 250.50 Contract requirements and
procurement.
(a) Contract requirements. Prior to donated foods being made available to a
food service management company, the
recipient agency must enter into a contract with the food service management company. The contract must ensure that all donated foods received for
use by the recipient agency for a period
specified as either the school year or
fiscal year are used in the recipient
agency’s food service. Contracts between recipient agencies in child nutrition programs and food service management companies must also ensure
compliance with other requirements in
this subpart relating to donated foods,
as well as other Federal requirements
in 7 CFR parts 210, 220, 225, or 226, as
applicable. Contracts between other recipient agencies—i.e., charitable institutions and recipient agencies utilizing

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Food and Nutrition Service, USDA

§ 250.51

TEFAP foods—and food service management companies are not subject to
the other requirements in this subpart.
(b) Types of contracts. Recipient agencies may enter into a fixed-price or a
cost-reimbursable contract with a food
service management company, except
that recipient agencies in CACFP are
prohibited from entering into cost-reimbursable contracts, in accordance
with 7 CFR part 226. Under a fixedprice contract, the recipient agency
pays a fixed cost per meal provided or
a fixed cost for a certain time period.
Under a cost-reimbursable contract,
the food service management company
charges the recipient agency for food
service operating costs, and also
charges fixed fees for management or
services.
(c) Procurement requirements. The recipient agency must meet Departmental procurement requirements in 7
CFR parts 3016 or 3019, as applicable, in
obtaining the services of a food service
management company, as well as applicable requirements in 7 CFR parts
210, 220, 225, or 226. The recipient agency must ensure that procurement documents, as well as contract provisions,
include any donated food activities
that a food service management company is to perform, such as those activities listed in paragraph (d) of this
section. The procurement and contract
must also specify the method used to
determine the donated food values to
be used in crediting, or the actual values assigned, in accordance with
§ 250.51. The method used to determine
the donated food values may not be established through a post-award negotiation, or by any other method that
may directly or indirectly alter the
terms and conditions of the procurement or contract.
(d) Activities relating to donated foods.
A food service management company
may perform specific activities relating to donated foods, such as those listed in this paragraph (d), in accordance
with procurement documents and its
contract with the recipient agency.
Such activities may also include the
procurement of processed end products
on behalf of the recipient agency. Such
procurement must ensure compliance
with the requirements in subpart C of
this part and with the provisions of the

distributing or recipient agency’s processing agreements, and must ensure
crediting of the recipient agency for
the value of donated foods contained in
such end products at the processing
agreement value. Although the food
service management company may
procure processed end products on behalf of the recipient agency, it may not
itself enter into the processing agreement with the processor required in
subpart C of this part. Other donated
food activities that the food service
management company may perform include:
(1) Preparing and serving meals;
(2) Ordering or selection of donated
foods, in coordination with the recipient agency, and in accordance with
§ 250.58(a);
(3) Storage and inventory management of donated foods, in accordance
with § 250.52; and
(4) Payment of processing fees or submittal of refund requests to a processor
on behalf of the recipient agency, or remittance of refunds for the value of donated foods in processed end products
to the recipient agency, in accordance
with the requirements in subpart C of
this part.
§ 250.51 Crediting for, and use of, donated foods.
(a) Crediting for donated foods. In both
fixed-price and cost-reimbursable contracts, the food service management
company must credit the recipient
agency for the value of all donated
foods received for use in the recipient
agency’s meal service in a school year
or fiscal year (including both entitlement and bonus foods). Such requirement includes crediting for the value
of donated foods contained in processed
end products if the food service management company’s contract requires
it to:
(1) Procure processed end products on
behalf of the recipient agency; or
(2) Act as an intermediary in passing
the donated food value in processed end
products on to the recipient agency.
(b) Method and frequency of crediting.
The recipient agency may permit crediting for the value of donated foods
through invoice reductions, refunds,
discounts, or other means. However, all
forms of crediting must provide clear

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§ 250.52

7 CFR Ch. II (1–1–09 Edition)

documentation of the value received
from the donated foods—e.g., by separate line item entries on invoices. If
provided for in a fixed-price contract,
the recipient agency may permit a food
service management company to precredit for donated foods. In pre-crediting, a deduction for the value of donated foods is included in the established fixed price per meal. However,
the recipient agency must ensure that
the food service management company
provides an additional credit for any
donated foods not accounted for in the
fixed price per meal—e.g., for donated
foods that are not made available until
later in the year. In cost-reimbursable
contracts, crediting may be performed
by disclosure; i.e., the food service
management company credits the recipient agency for the value of donated
foods by disclosing, in its billing for
food costs submitted to the recipient
agency, the savings resulting from the
receipt of donated foods for the billing
period. In all cases, the recipient agency must require crediting to be performed not less frequently than annually, and must ensure that the specified method of valuation of donated
foods permits crediting to be achieved
in the required time period. A school
food authority must also ensure that
the method, and timing, of crediting
does not cause its cash resources to exceed the limits established in 7 CFR
210.9(b)(2).
(c) Donated food values required in
crediting. The recipient agency must
ensure that, in crediting it for the
value of donated foods, the food service
management company uses the donated food values determined by the
distributing agency, in accordance
with § 250.58(e), or, if approved by the
distributing agency, donated food values determined by an alternate means
of the recipient agency’s choosing. For
example, the recipient agency may,
with the approval of the distributing
agency, specify that the value will be
the average price per pound for a food,
or for a group or category of foods (e.g.,
all frozen foods or cereal products), as
listed in market journals over a specified period of time. However, the method of determining the donated food values to be used in crediting must be included in procurement documents and

in the contract, and must result in the
determination of actual values; e.g.,
the average USDA purchase price for
the period of the contract with the food
vendor, or the average price per pound
listed in market journals over a specified period of time. Negotiation of such
values is not permitted. Additionally,
the method of valuation must ensure
that crediting may be achieved in accordance with paragraph (b) of this section, and at the specific frequency established in procurement documents
and in the contract.
(d) Use of donated foods. The food
service management company must use
all donated ground beef, donated
ground pork, and all processed end
products, in the recipient agency’s food
service, and must use all other donated
foods, or commercially purchased foods
of the same generic identity, of U.S. origin, and of equal or better quality
than the donated foods, in the recipient
agency’s food service (unless the contract specifically stipulates that the
donated foods, and not such commercial substitutes, be used).
§ 250.52 Storage and inventory management of donated foods.
(a) General requirements. The food
service management company must
meet the general requirements in
§ 250.14(b) for the storage and inventory
management of donated foods.
(b) Storage and inventory with commercially purchased foods. The food service
management company may store and
inventory donated foods together with
foods it has purchased commercially
for the school food authority’s use (unless specifically prohibited in the contract). It may store and inventory such
foods together with other commercially purchased foods only to the extent that such a system ensures compliance with the requirements for the
use of donated foods in § 250.51(d)—i.e.,
use all donated ground beef and ground
pork, and all end products in the food
service, and use all other donated foods
or commercially purchased foods of the
same generic identity, of U.S. origin,
and of equal or better quality than the
donated foods, in the food service. Additionally, under cost-reimbursable
contracts, the food service management company must ensure that its

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§ 250.53

system of inventory management does
not result in the recipient agency being
charged for donated foods.
(c) Disposition of donated foods and
credit reconciliation upon termination of
the contract. When a contract terminates, and is not extended or renewed,
the food service management company
must return all unused donated ground
beef, donated ground pork, and processed end products, and must, at the
recipient agency’s discretion, return
other unused donated foods. The recipient agency must ensure that the food
service management company has
credited it for the value of all donated
foods received for use in the recipient
agency’s meal service in a school year
or fiscal year, as applicable.

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§ 250.53

Contract provisions.

(a) Required contract provisions in
fixed-price contracts. The following provisions relating to the use of donated
foods must be included, as applicable,
in a recipient agency’s fixed-price contract with a food service management
company. Such provisions must also be
included in procurement documents.
The required provisions are:
(1) A statement that the food service
management company must credit the
recipient agency for the value of all donated foods received for use in the recipient agency’s meal service in the
school year or fiscal year (including
both entitlement and bonus foods), and
including the value of donated foods
contained in processed end products, in
accordance with the contingencies in
§ 250.51(a);
(2) The method and frequency by
which crediting will occur, and the
means of documentation to be utilized
to verify that the value of all donated
foods has been credited;
(3) The method of determining the
donated food values to be used in crediting, in accordance with § 250.51(c), or
the actual donated food values;
(4) Any activities relating to donated
foods that the food service management company will be responsible for,
in accordance with § 250.50(d), and assurance that such activities will be
performed in accordance with the applicable requirements in 7 CFR part
250;

(5) A statement that the food service
management company will use all donated ground beef and ground pork
products, and all processed end products, in the recipient agency’s food
service;
(6) A statement that the food service
management company will use all
other donated foods, or will use commercially purchased foods of the same
generic identity, of U.S. origin, and of
equal of better quality than the donated foods, in the recipient agency’s
food service;
(7) Assurance that the procurement
of processed end products on behalf of
the recipient agency, as applicable,
will ensure compliance with the requirements in subpart C of 7 CFR part
250 and with the provisions of distributing or recipient agency processing
agreements, and will ensure crediting
of the recipient agency for the value of
donated foods contained in such end
products at the processing agreement
value;
(8) Assurance that the food service
management company will not itself
enter into the processing agreement
with the processor required in subpart
C of 7 CFR part 250;
(9) Assurance that the food service
management company will comply
with the storage and inventory requirements for donated foods;
(10) A statement that the distributing agency, subdistributing agency,
or recipient agency, the Comptroller
General, the Department of Agriculture, or their duly authorized representatives, may perform onsite reviews of the food service management
company’s food service operation, including the review of records, to ensure
compliance with requirements for the
management and use of donated foods;
(11) A statement that the food service
management company will maintain
records to document its compliance
with requirements relating to donated
foods, in accordance with § 250.54(b);
and
(12) A statement that extensions or
renewals of the contract, if applicable,
are contingent upon the fulfillment of
all contract provisions relating to donated foods.

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§ 250.54

7 CFR Ch. II (1–1–09 Edition)

(b) Required contract provisions in costreimbursable contracts. A cost-reimbursable contract must include the same
provisions as those required for a fixedprice contract in paragraph (a) of this
section. Such provisions must also be
included in procurement documents.
However, a cost-reimbursable contract
must also contain a statement that the
food service management company will
ensure that its system of inventory
management will not result in the recipient agency being charged for donated foods.

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§ 250.54

Recordkeeping and reviews.

(a) Recordkeeping requirements for the
recipient agency. The recipient agency
must maintain the following records
relating to the use of donated foods in
its contract with the food service management company:
(1) The donated foods and processed
end products received and provided to
the food service management company
for use in the recipient agency’s food
service;
(2) Documentation that the food service management company has credited
it for the value of all donated foods received for use in the recipient agency’s
food service in the school or fiscal
year, including, in accordance with the
requirements in § 250.51(a), the value of
donated foods contained in processed
end products; and
(3) The actual donated food values
used in crediting.
(b) Recordkeeping requirements for the
food service management company. The
food service management company
must maintain the following records
relating to the use of donated foods in
its contract with the recipient agency:
(1) The donated foods and processed
end products received from, or on behalf of, the recipient agency, for use in
the recipient agency’s food service;
(2) Documentation that it has credited the recipient agency for the value
of all donated foods received for use in
the recipient agency’s food service in
the school or fiscal year, including, in
accordance with the requirements in
§ 250.51(a), the value of donated foods
contained in processed end products;
and

(3) Documentation of its procurement
of processed end products on behalf of
the recipient agency, as applicable.
(c) Review requirements for the recipient agency. The recipient agency must
ensure that the food service management company is in compliance with
the requirements of this part through
its monitoring of the food service operation, as required in 7 CFR parts 210,
225, or 226, as applicable. The recipient
agency must also conduct a reconciliation at least annually (and upon termination of the contract) to ensure
that the food service management
company has credited it for the value
of all donated foods received for use in
the recipient agency’s food service in
the school or fiscal year, including, in
accordance with the requirements in
§ 250.51(a), the value of donated foods
contained in processed end products.
(d) Departmental reviews of food service
management companies. The Department
may conduct reviews of food service
management company operations, as
necessary, to ensure compliance with
the requirements of this part with respect to the use and management of donated foods.

Subpart E—National School Lunch
Program (NSLP) and Other
Child Nutrition Programs
SOURCE: 73 FR 46185, Aug. 8, 2008, unless
otherwise noted.

§ 250.56 Provision of donated foods in
NSLP.
(a) Distribution of donated foods in
NSLP. The Department provides donated foods in NSLP to distributing
agencies. Distributing agencies provide
donated foods to school food authorities that participate in NSLP for use in
serving nutritious lunches or other
meals to schoolchildren in their nonprofit school food service. The distributing agency must confirm the participation of school food authorities in
NSLP with the State administering
agency (if different from the distributing agency). In addition to requirements in this part relating to donated
foods, distributing agencies and school
food authorities in NSLP must adhere
to Federal regulations in 7 CFR part
210, as applicable.

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Food and Nutrition Service, USDA

§ 250.58

(b) Types of donated foods distributed.
The Department purchases a wide variety of foods for distribution in NSLP
each school year. A list of available
foods is posted on the FNS Web site,
for access by distributing agencies and
school food authorities. In addition to
Section 6 foods (42 U.S.C. 1755) as described in paragraph (c) of this section,
the distributing agency may also receive Section 14 donated foods (42
U.S.C. 1762(a)), and donated foods under
Section 32 (7 U.S.C. 612c), Section 416 (7
U.S.C. 1431), or Section 709 (7 U.S.C.
1446a–1), as available.
(c) National per-meal value of donated
foods. For each school year, the distributing agency receives, at a minimum,
the national per-meal value of donated
foods, as established by Section 6(c) of
the Richard B. Russell National School
Lunch Act (42 U.S.C. 1755(c)), multiplied by the number of reimbursable
lunches served in the State in the previous school year. The donated foods
provided in this manner are referred to
as Section 6 foods, or entitlement
foods. The national per-meal value is
adjusted each year to reflect changes
in the Bureau of Labor Statistic’s Producer Price Index for Foods Used in
Schools and Institutions, in accordance
with the Richard B. Russell National
School Lunch Act. The adjusted value
is published in a notice in the FEDERAL
REGISTER in July of each year. Reimbursable lunches are those that meet
the nutritional standards established
in 7 CFR part 210, and that are reported
to FNS, in accordance with the requirements in that part.
(d) Donated food values used to credit
distributing agency entitlement levels.
FNS uses the average price (cost per
pound) for USDA purchases of donated
food made in a contract period to credit distributing agency entitlement levels.
(e) Cash in lieu of donated foods.
States that phased out their food distribution facilities prior to July 1, 1974,
are permitted to choose to receive cash
in lieu of the donated foods to which
they would be entitled in NSLP, in accordance with the Richard B. Russell
National School Lunch Act (42 U.S.C.
1765) and with 7 CFR part 240.

§ 250.57 Commodity schools.
(a)
Categorization
of
commodity
schools. Commodity schools are schools
that operate a nonprofit school food
service in accordance with 7 CFR part
210, but receive additional donated food
assistance rather than the general cash
payment available to them under Section 4 of the Richard B. Russell National School Lunch Act (42 U.S.C.
1753). In addition to requirements in
this part relating to donated foods,
commodity schools must adhere to
Federal regulations in 7 CFR part 210,
as applicable.
(b) Value of donated foods for commodity schools. For participating commodity schools, the distributing agency receives donated foods valued at the
sum of the national per-meal value and
the value of the general cash payment
available to it under Section 4 of the
Richard B. Russell National School
Lunch Act (42 U.S.C. 1753), multiplied
by the number of reimbursable lunches
served by commodity schools in the
previous school year. From the total
value of donated food assistance for
which it is eligible, a commodity
school may elect to receive up to 5
cents per meal in cash to cover processing and handling expenses related to
the use of donated foods. In addition to
Section 6 and Section 14 foods under
the Richard B. Russell National School
Lunch Act (42 U.S.C. 1755 and 1762(a)),
the distributing agency may also receive donated foods under Section 32 (7
U.S.C. 612c), Section 416 (7 U.S.C. 1431),
or Section 709 (7 U.S.C. 1446a–1), as
available, for commodity schools.
§ 250.58 Ordering donated foods and
their provision to school food authorities.
(a) Ordering and distribution of donated foods. The distributing agency orders donated foods through a Webbased system called the Electronic
Commodity Ordering System (ECOS).
Through ECOS, the distributing agency
places orders directly into a centralized computer system. Before submitting orders for donated foods to FNS,
the distributing agency must ensure
that all school food authorities are
aware of the full list of available donated foods, and have the opportunity
to provide input at least annually in

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§ 250.59

7 CFR Ch. II (1–1–09 Edition)

determining the donated foods from
the full list that are made available to
them for ordering or selection. The distributing agency must ensure distribution to school food authorities of all
such selected donated foods that may
be cost-effectively distributed to them,
and may not prohibit the use of split
shipments in determining such cost-effectiveness.
(b) Value of donated foods offered to
school food authorities. In accordance
with Section 6(c) of the Richard B.
Russell National School Lunch Act (42
U.S.C. 1755(c)), the distributing agency
must offer the school food authority,
at a minimum, the national per-meal
value of donated food assistance multiplied by the number of reimbursable
lunches served by the school food authority in the previous school year.
This is referred to as the commodity
offer value. For a commodity school,
the distributing agency must offer the
sum of the national per-meal value of
donated foods and the value of the general cash payment available to it under
Section 4 of the Richard B. Russell National School Lunch Act (42 U.S.C.
1753), multiplied by the number of reimbursable lunches served by the
school in the previous school year. The
school food authority may also receive
bonus foods, as available, in addition to
the Section 6 foods.
(c) Receipt of less donated foods than
the commodity offer value. In certain
cases, the school food authority may
receive less donated foods than the
commodity offer value in a school
year. This ‘‘adjusted’’ value of donated
foods is referred to as the adjusted assistance level. For example, the school
food authority may receive an adjusted
assistance level if:
(1) The distributing agency, in consultation with the school food authority, determines that the school food
authority cannot efficiently utilize the
commodity offer value of donated
foods; or
(2) The school food authority does
not order, or select, donated foods
equal to the commodity offer value
that can be cost-effectively distributed
to it.
(d) Receipt of more donated foods than
the commodity offer value. The school
food authority may receive more do-

nated foods than the commodity offer
value if the distributing agency, in
consultation with the school food authority, determines that the school
food authority may efficiently utilize
more donated foods than the commodity offer value, and more donated
foods are available for distribution.
This may occur, for example, if other
school food authorities receive less
than the commodity offer value of donated foods for one of the reasons described in paragraph (c) of this section.
(e) Donated food values required in
crediting school food authorities. The distributing agency must use one of the
following values for donated foods in
crediting the school food authority for
its commodity offer value or adjusted
assistance level:
(1) The USDA purchase price (cost
per pound), which may be an average
price for purchases made for the duration of the contract with the food vendor;
(2) Estimated cost-per-pound data
provided by the Department, as included in commodity survey memoranda; or
(3) The USDA commodity file cost as
of a date specified by the distributing
agency.
§ 250.59 Storage and inventory management of donated foods.
(a) General requirements. Distributing
agencies, subdistributing agencies, and
school food authorities must meet the
requirements for storage and inventory
of donated foods in § 250.14, in addition
to the requirements in this section.
(b) Storage at distributing agency level.
The distributing or subdistributing
agency, or storage facilities with which
they have contracts, must store donated foods in a manner that permits
them to be distinguished from commercially purchased foods or other foods,
in order to ensure compliance with the
requirements for the distribution and
control of donated foods in this part.
(c) Storage by school food authorities.
The school food authority may store
and inventory donated foods together
with commercially purchased foods and
other foods, under a single inventory
management system, as defined in this

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Food and Nutrition Service, USDA

§ 250.61

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part, unless the distributing agency requires donated foods to be distinguished from commercially purchased
foods in storage and inventoried separately.
(d) Storage by storage facilities under
contract with school food authorities. A
storage facility under contract with a
school food authority may store and
inventory donated foods together with
commercially purchased foods it is
storing for the school food authority,
unless its contract with the school food
authority prohibits this. However, the
storage facility may not commingle
foods it is storing for a school food authority with foods it is storing for a
commercial enterprise or other entity.
§ 250.60 Use of donated foods in the
school food service.
(a) Use of donated foods in school
lunches and other meals or activities. The
school food authority should use donated foods, as far as practical, in the
lunches served to schoolchildren, for
which they receive an established permeal value of donated food assistance
each school year. However, the school
food authority may also use donated
foods in other nonprofit school food
service activities. Revenues received
from such activities must accrue to the
school food authority’s nonprofit
school food service account. Some examples of other activities in which donated foods may be used include:
(1) School breakfasts or other meals
served in child nutrition programs;
(2) A la carte foods sold to children;
(3) Meals served to adults directly involved in the operation and administration of the nonprofit food service,
and to other school staff; and
(4) Training in nutrition, health, food
service, or general home economics instruction for students.
(b) Use of donated foods outside of the
nonprofit school food service. The school
food authority should not use donated
foods in meals or food service activities
that do not benefit primarily schoolchildren, such as banquets or catered
events. However, their use in such
meals or activities may not always be
avoided, e.g, for a school food authority utilizing single inventory management. In all cases, the school food authority must ensure reimbursement to

the nonprofit school food service account for the value of donated foods
used in such activities, in addition to
reimbursement for other resources utilized from that account. Since school
food authorities utilizing single inventory management cannot reimburse
the nonprofit school food service account based on actual usage of donated
foods outside of the nonprofit school
food service, they must establish an alternate method—e.g., by including the
current per-meal value of donated food
reimbursement in the price charged for
the food service activities.
(c) Use of donated foods in a contract
with a food service management company.
A school food authority may use donated foods in a contract with a food
service management company to conduct the food service. The contract
must meet the requirements in subpart
D of this part with respect to donated
foods, and must also meet requirements in 7 CFR part 210 and 7 CFR
parts 3016 or 3019, as applicable, with
respect to the procurement of such
contracts. The school food authority
must also ensure that a food service
management company providing meals
for banquets or catered events, or other
food service activities that do not benefit primarily schoolchildren, ensure
reimbursement to the nonprofit school
food service account for donated foods
used in such activities, in accordance
with paragraph (b) of this section.
(d) Use of donated foods in providing a
meal service to other school food authorities. A school food authority may use
donated foods to provide a meal service
to other school food authorities, under
an agreement between the parties. A
school food authority providing such a
service may commingle its own donated foods and the donated foods of
other school food authorities that are
parties to the agreement.
§ 250.61 Child and Adult Care Food
Program (CACFP).
(a) Distribution of donated foods in
CACFP. The Department provides donated foods in CACFP to distributing
agencies, which provide them to child
care and adult care institutions participating in CACFP for use in serving
nutritious lunches and suppers to eligible recipients. Distributing agencies

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§ 250.62

7 CFR Ch. II (1–1–09 Edition)

and child care and adult care institutions must also adhere to Federal regulations in 7 CFR part 226, as applicable.
(b)Types and quantities of donated
foods distributed. For each school year,
the distributing agency receives, at a
minimum, national per-meal value of
donated food assistance (or cash in lieu
of donated foods) multiplied by the
number reimbersable lunches and suppers served in the State in the previous
school year, as established in Section
6(c) of the Richard B. Russell National
School Lunch Act (42 U.S.C. 1755(c)).
The national per-meal value is adjusted each year to reflect changes in
the Bureau of Labor Statistic’s Producer Price Index for Foods Used in
Schools and Institutions. The adjusted
per-meal value is published in a notice
in the FEDERAL REGISTER in July of
each year. Reimbursable lunches and
suppers are those meeting the nutritional standards established in 7 CFR
part 226. The number of reimbursable
lunches and suppers may be adjusted
during, or at the end of the school
year, in accordance with 7 CFR part
226. In addition to Section 6 entitlement foods (42 U.S.C. 1755(c)), the distributing agency may also receive Section 14 donated foods (42 U.S.C. 1762(a)),
and donated foods under Section 32 (7
U.S.C. 612c), Section 416 (7 U.S.C. 1431),
or Section 709 (7 U.S.C. 1446a–1), as
available, for distribution to child care
and adult care institutions participating in CACFP.
(c) Cash in lieu of donated foods. In accordance with the Richard B. Russell
National School Lunch Act, and with 7
CFR part 226, the State administering
agency must determine whether child
care and adult care institutions participating in CACFP wish to receive
donated foods or cash in lieu of donated
foods, and ensure that they receive the
preferred form of assistance. The State
administering agency must inform the
distributing agency (if a different agency) which institutions wish to receive
donated foods and must ensure that
such foods are provided to them. However, if the State administering agency, in consultation with the distributing agency, determines that distribution of such foods would not be cost-effective, it may, with the concurrence of

FNS, provide cash payments to the applicable institutions instead.
(d) Use of donated foods in a contract
with a food service management company.
A child care or adult care institution
may use donated foods in a contract
with a food service management company to conduct its food service. The
contract must meet the requirements
in Subpart D of this part with respect
to donated foods, and must also meet
requirements in 7 CFR part 226 and 7
CFR parts 3016 or 3019, as applicable,
with respect to the procurement of
such contracts.
(e) Applicability of other requirements
in this subpart to CACFP. The requirements in this subpart relating to the
ordering, storage and inventory management, and use of donated foods in
NSLP, also apply to CACFP. However,
in accordance with 7 CFR part 226, a
child care or adult care institution
that uses donated foods to prepare and
provide meals to other such institutions is considered a food service management company.
§ 250.62 Summer Food Service Program (SFSP).
(a) Distribution of donated foods in
SFSP. The Department provides donated foods in SFSP to distributing
agencies, which provide them to eligible service institutions participating in
SFSP for use in serving nutritious
meals to needy children primarily in
the summer months, in their nonprofit
food service programs. Distributing
agencies and service institutions in
SFSP must also adhere to Federal regulations in 7 CFR part 225, as applicable.
(b) Types and quantities of donated
foods distributed. The distributing agency receives donated foods available
under Section 6 and Section 14 of the
Richard B. Russell National School
Lunch Act (42 U.S.C. 1755 and 1762), and
may also receive donated foods under
Section 32 (7 U.S.C. 612c), Section 416 (7
U.S.C. 1431), or Section 709 (7 U.S.C.
1446a–1), as available, for distribution
to eligible service institutions participating in SFSP. Section 6 donated
foods are provided to distributing agencies in accordance with the number of
meals served in the State in the previous school year that are eligible for

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Food and Nutrition Service, USDA

§ 250.64

donated food support, in accordance
with 7 CFR part 225.
(c) Distribution of donated foods to
service institutions in SFSP. The distributing agency provides donated food assistance to eligible service institutions
participating in SFSP based on the
number of meals served that are eligible for donated food support, in accordance with 7 CFR part 225.
(d) Use of donated foods in a contract
with a food service management company.
A service institution may use donated
foods in a contract with a food service
management company to conduct the
food service. The contract must meet
the requirements in Subpart D of this
part with respect to donated foods, and
must also meet requirements in 7 CFR
part 225 and 7 CFR parts 3016 or 3019, as
applicable, with respect to the procurement of such contracts.
(e) Applicability of other requirements
in this subpart to SFSP. The requirements in this subpart relating to the
ordering, storage and inventory management, and use of donated foods in
NSLP, also apply to SFSP.

Subpart F—Household Programs

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SOURCE: 73 FR 46184, Aug. 8, 2008, unless
otherwise noted.

§ 250.63 Commodity
Supplemental
Food Program.
(a) Distribution. The distributing
agency shall distribute donated foods
to the State agency which is designated by the State to administer the
Commodity Supplemental Food Program for that State and which has entered into a written agreement with
the Department for the administration
of that program in accordance with 7
CFR part 247, the regulations for that
program. The State agency administering the Commodity Supplemental
Food Program shall distribute donated
foods to local agencies for use by eligible recipients in accordance with the
provisions of 7 CFR part 247 and with
the provisions of this part, and may
enter into an agreement with the distributing agency for use of the distributing agency’s facilities for distribution.
(b) Quantities of donated foods. Distribution of donated foods to the des-

ignated State agencies for the Commodity Supplemental Food Program
shall be made on the basis of each
State agency’s quarterly estimate of
need.
(c) Types of donated foods authorized
for donation. State agencies distributing donated foods through the Commodity Supplemental Food Program
are eligible to receive such foods under
section 32, section 416, section 709 and
section 4(a).
[53 FR 20426, June 3, 1988. Redesignated at 73
FR 46184, Aug. 8, 2008]

§ 250.64 Food Distribution Program in
the Trust Territory of the Pacific Islands.
(a) Distribution. The distributing
agency shall make donated foods available for distribution to households in
the Trust Territory of the Pacific Islands by those welfare agencies which
certify households in accordance with a
plan of operation approved by FNS, as
required by paragraph (d) of this section. Distribution of donated foods to
households shall be made in accordance
with the approved plan of operation.
(b) Quantities and value of donated
foods. Distribution of donated foods
shall be based on the actual number of
households in need of food assistance.
(c) Types of donated foods authorized
for donation. Agencies which make distribution to needy persons are eligible
to receive foods under section 416, section 32, section 709 and section 4(a).
(d) Plan of operation. Prior to making
distribution to agencies or households,
the distributing agency shall submit a
plan of operation for approval by the
appropriate FNSRO. Such plans shall
incorporate the procedures and methods to be used in certifying households
in need of food assistance, in making
distribution to households, and in providing a fair hearing to households
whose claims for food assistance under
the plan are denied or are not acted
upon with reasonable promptness, or
who are aggrieved by an agency’s interpretation of any provision of the plan.
No amendment to the plan of operation
of the distributing agency shall be
made without prior approval of FNS,
and FNS may require amendment of
any plan as a condition of continuing
approval. The distributing agency shall

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§ 250.64

7 CFR Ch. II (1–1–09 Edition)

require welfare agencies making distribution to households to conduct distribution programs in accordance with
all provisions of the plan of operation.
At a minimum, the plan shall include
the following:
(1) The name of the public welfare
agency or agencies which will be responsible for certification of households;
(2) The manner in which donated food
will be distributed, including, but not
limited to, the identity of the agency
that will distribute donated foods, the
storage and distribution facilities to be
used and the method of financing;
(3) The specific criteria to be used in
certifying households as in need of food
assistance. The income and resource
standards establishes by the distributing agency for use by welfare agencies in determining the eligibility of
applicant households, after October
1979, shall continue to be those standards used as of that date which were incorporated in a plan of operation approved by FNS, unless an amendment
to such standard is required or approved by FNS;
(4) The method or methods that will
be used to verify the information upon
which the certification of eligibility is
based, including the kinds of documentary evidence that applicants are required to furnish to obtain certification;
(5) Provisions for periodically reviewing the certifications of households to
discover any change in their status
which would necessitate a change in
the determination of eligibility. The
eligibility of households shall be reviewed at least every three months, except that such reviews may be made at
longer periods, not to exceed 12
months, provided that such longer periods are based upon a determination by
the certifying agency that the income
and resources available to such households will probably remain essentially
unchanged during such period;
(6) Provisions for identifying each
person who has been designated to receive donated foods for a household;
(7) Assurance that the distribution of
donated foods shall not be used as a
means to further the political interest
of any individual or party, and that
there shall be no discrimination

against recipients of donated foods because of race, color, national origin,
sex, age or handicap;
(8) Assurance that:
(i) Citizenship or durational residence requirements shall not be imposed as a condition of eligibility and
(ii) Recipients shall not be required
to make any payments in money, materials or services, for or in connection
with the receipt of donated foods, and
that they shall not be solicited in connection with the receipt of donated
foods for voluntary cash contributions
for any purpose;
(9) The manner in which the distributing agency plans to supervise the
program; and
(10) Definitions of any terms used
which cannot be determined by reference to Webster’s New International
Dictionary (third edition).
(e) Operating expense funds—(1) Application for funds. To receive administrative funds, the distributing agency
shall submit Form AD–623, ‘‘Application for Federal Assistance,’’ to the appropriate FNSRO at least three months
prior to the beginning of the Federal
fiscal year. Approval of the application
by FNS shall be a prerequisite to payment of any funds to the distributing
agency. The Department will make
payments to the distributing agency to
assist it in meeting operating expenses
incurred in administering food distribution for needy persons.
(2) Availability of funds. FNS will review and evaluate the budget information submitted by the distributing
agency in relationship to the distributing agency’s plan of operation and
any other factors which may be relevant to FNS’ determination as to
whether the estimated expenditures
are reasonable and justified. FNS will
give written notification to the distributing agency of:
(i) Its approval or disapproval of any
or all of the estimated expenditures;
and
(ii) The amount of funds which will
be made available.
(3) Payment of funds. Payments shall
be made to the distributing agency
through a Letter of Credit or an advance by Treasury Check. These payments will be issued in accordance with
Treasury
Department
procedures,

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Food and Nutrition Service, USDA

§ 250.65

Treasury Circular No. 1075 and through
the appropriate Treasury Regional Disbursing Office (RDO).
(4) Use of funds. The distributing
agency shall make every reasonable effort to ensure the availability of a food
distribution program for needy persons
in households and shall assign priority
in the use of any funds received under
this Section to accomplish that objective. Any remaining funds shall be used
to expand and improve distribution to
needy households. Such funds may be
used for any costs which are not disallowed under Office of Management
and Budget Circular A–87 (a copy of
which may be obtained from FNS) and
which are incurred in distributing donated foods to households, including
determining eligibility of recipients,
except for the purchase cost of land
and buildings. In no event shall such
funds be used to pay any portion of any
expenses if reimbursement or payment
therefore is claimed or made available
from any other Federal source.
(5) Accounting for funds. The distributing agency which receives administrative funds under this Section shall
establish and maintain an effective
system of fiscal control and accounting
procedures. The accounting procedures
maintained by the distributing agency
shall be such as to accurately reflect
the receipt, expenditure and current
balance of funds provided by FNS. The
accounting procedures shall also provide for segregation of costs specifically identifiable to the Food Distribution Program from any other costs incurred by the distributing agency. Any
budget revisions by the distributing
agency which require the transfer of
funds from an FNS approved cost category to another shall be in accordance
with the budget revision procedures set
forth in 7 CFR part 3015 and shall be
approved by FNS prior to any transfer
of funds.
(6) Return, reduction and reallocation
of funds. (i) FNS may require the distributing agency to return prior to the
end of the Federal fiscal year any or all
unobligated funds received under this
section, and may reduce the amount it
has apportioned or agreed to pay to the
distributing agency if FNS determines
that:

(A) The distributing agency is not administering the Food Distribution Program in accordance with its plan of operation approved by FNS and the provisions of this part;
(B) The amount of funds which the
distributing agency requested from
FNS is in excess of actual need, based
on reports of expenditures and current
projections of program needs; or
(C) Circumstances or conditions justify the return, reallocation or transfer
of funds to accomplish the purposes of
this part.
(ii) The distributing agency shall return to FNS within 90 days following
the close of each Federal fiscal year
any funds received under paragraph (e)
of this section which are obligated at
that time.
(7) Financial reports. The distributing
agency shall submit quarterly and annual reports to FNS on Form SF–269
concerning the obligations, expenditure and status of funds received under
this Section. In addition, the distributing agency receiving funds under
paragraph (e) of this section shall submit any other reports in such form as
may be required from time to time by
the Department.
(f) Records, reports and audits. The distributing agency shall:
(1) Maintain and retain for three
years from the close of the Federal fiscal year to which they pertain, complete and accurate records of all
amounts received and disbursed under
paragraph (e) of this section,
(2) Keep such accounts and records as
may be necessary to enable FNS to determine whether there has been compliance with this section, and
(3) Permit representatives of the Department and of a General Accounting
Office of the United States to inspect,
audit and copy such records and accounts at any reasonable time.
[53 FR 20426, June 3, 1988. Redesignated at 73
FR 46184, Aug. 8, 2008]

§ 250.65 Food Distribution Program on
Indian reservations.
(a) Distribution. Distributing agencies
which operate a food distribution program on Indian reservations shall comply with the provisions set forth in
§§ 250.1, 250.2, 250.3, 250.10, 250.11, 250.12,
250.13 (with the exception of paragraph

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§ 250.66

7 CFR Ch. II (1–1–09 Edition)

(d)(2)), § 250.14, §§ 250.15 and 250.17(d) to
the extent that these provisions are
not inconsistent with the regulations
cited in paragraph (b) of this section.
(b) In addition to complying with the
provisions identified in paragraph (a)
of this section, distributing agencies
shall also comply with the provisions
set forth in part 253, Food Distribution
Program on Indian Reservations or
part 254, Food Distribution Program in
Oklahoma, as applicable.
[53 FR 20426, June 3, 1988, as amended at 53
FR 27476, July 21, 1988. Redesignated at 73 FR
46184, Aug. 8, 2008]

§ 250.66 Special Supplemental Nutrition Program for Women, Infants
and Children.
(a) Distribution. At the request of the
State agency responsible for administering the Special Supplemental Nutrition Program for Women, Infants
and Children (WIC Program) under part
246 of this chapter and with approval of
the Department, donated foods may be
made available for distribution to program participants. In instances when
donated foods are made available,
State agencies shall pay the Department using funds allocated to the
State for the WIC Program for those
donated foods which are provided to
participants as part of the food package. Donated foods which are provided
to participants in addition to the quantities authorized for the food package
will be made available to the State
agency free of charge.
(b) Quantities and value of donated
foods. Distribution of donated foods to
State agencies for the WIC Program
shall be made on the basis of each
State agency’s quarterly estimate of
need.
(c) Types of donated foods authorized
for donation. State agencies participating in the WIC Program under part
246 of this chapter are eligible to receive donated foods under section 416
and section 32.

cprice-sewell on PRODPC61 with CFR

[53 FR 20426, June 3, 1988. Redesignated at 73
FR 46184, Aug. 8, 2008]

Subpart G—Other Donated Food
Outlets
SOURCE: 73 FR46184, Aug. 8, 2008, unless
otherwise noted.

§ 250.67 Charitable institutions.
(a) Distribution to charitable institutions. The Department provides donated foods to distributing agencies for
distribution to charitable institutions,
as defined in this part. A charitable institution must have a signed agreement with the distributing agency in
order to receive donated foods, in accordance with § 250.12(b). However, the
following organizations may not receive donated foods as charitable institutions:
(1) Schools, summer camps, service
institutions, and child and adult care
institutions that participate in child
nutrition programs or as commodity
schools; and
(2) Adult correctional institutions
that do not conduct rehabilitation programs for a majority of inmates.
(b) Types of charitable institutions.
Some types of charitable institutions
that may receive donated foods, if they
meet the requirements of this section,
include:
(1) Hospitals or retirement homes;
(2) Emergency shelters, soup kitchens, or emergency kitchens;
(3) Elderly nutrition projects or adult
day care centers;
(4) Schools, summer camps, service
institutions, and child care institutions that do not participate in child
nutrition programs; and
(5) Adult correctional institutions
that conduct rehabilitation programs
for a majority of inmates.
(c) Determining service to predominantly needy persons. To determine if a
charitable institution serves predominantly needy persons, the distributing
agency must use:
(1) Socioeconomic data of the area in
which the organization is located, or of
the clientele served by the organization;
(2) Data from other public or private
social service agencies, or from State
advisory boards, such as those established in accordance with 7 CFR
251.4(h)(4); or
(3) Other similar data.

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§ 250.69

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(d) Types and quantities of donated
foods distributed. A charitable institution may receive donated foods under
Section 4(a), Section 32, Section 416, or
Section 709, as available. The distributing agency must distribute donated
foods to charitable institutions based
on the quantities that each may effectively utilize without waste, and the
total quantities available for distribution to such institutions.
(e) Contracts with food service management companies. A charitable institution may use donated foods in a contract with a food service management
company. The contract must ensure
that all donated foods received for use
by the charitable institution in a fiscal
year are used in the charitable institution’s food service. However, the charitable institution is not subject to the
other requirements in subpart D of this
part relating to the use of donated
foods under such contracts.
§ 250.68 Nutrition Services Incentive
Program (NSIP).
(a) Distribution of donated foods in
NSIP. The Department provides donated foods in NSIP to State Agencies
on Aging and their selected elderly nutrition projects, for use in providing
meals to elderly persons. NSIP is administered at the Federal level by
DHHS’ Administration on Aging (AoA),
which provides an NSIP grant each
year to State Agencies on Aging. The
State agencies may choose to receive
all, or part, of the grant as donated
foods, on behalf of its elderly nutrition
projects. The Department is responsible for the purchase of the donated
foods and their delivery to State Agencies on Aging. AoA is responsible for
transferring funds to the Department
for the cost of donated food purchases
and for expenses related to such purchases.
(b) Types and quantities of donated
foods distributed. Each State Agency on
Aging, and its elderly nutrition
projects, may receive any types of donated foods available in food distribution or child nutrition programs, to the
extent that such foods may be distributed cost-effectively. Each State Agency on Aging may receive donated foods
with a value equal to its NSIP grant.
Each State Agency on Aging and elder-

ly nutrition projects may also receive
donated foods under Section 32, Section
416, and Section 709, as available, and
under Section 14 (42 U.S.C. 1762(a)).
(c) Role of distributing agency. The Department delivers NSIP donated foods
to distributing agencies, which distribute them to elderly nutrition
projects selected by each State or Area
Agency on Aging. The distributing
agency may only distribute donated
foods to elderly nutrition projects with
which they have signed agreements.
The agreements must contain provisions that describe the roles of each
party in ensuring that the desired donated foods are ordered, stored, and
distributed in an effective manner.
(d) Donated food values used in crediting a State Agency on Aging’s NSIP
grant. FNS uses the average price (cost
per pound) for USDA purchases of a donated food made in a contract period in
crediting a State Agency on Aging’s
NSIP grant.
(e) Coordination between FNS and AoA.
FNS and AoA coordinate their respective roles in NSIP through the execution of annual agreements. The agreement ensures that AoA transfers funds
to FNS sufficient to purchase the donated foods requested by State Agencies on Aging, and to meet expenses related to such purchases. The agreement
also authorizes FNS to carry over any
such funds that are not used in the current fiscal year to make purchases of
donated foods for the appropriate State
Agencies on Aging in the following fiscal year.
§ 250.69

Disaster food assistance.

(a) Organizational eligibility. In instances in which the President has declared a disaster and FNS has determined that, as a result of the disaster,
low-income households are unable to
purchase adequate amounts of nutritious food, disaster organizations (including agencies of State and Federal
government) may be eligible to receive
donated foods for congregate meal
service or household distribution to
disaster victims. Applications submitted by disaster organizations to the
distributing agency for the receipt and
distribution of donated foods in accordance with paragraphs (b)(2) and (c)(2) of

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§ 250.69

7 CFR Ch. II (1–1–09 Edition)

this section shall be initially submitted in writing if circumstances permit and, if not, confirmed in writing in
a timely manner. Both the applications
and the written approval for the use of
USDA commodities shall be maintained in accordance with the recordkeeping requirements of this part.
(b) Congregate meal service—(1) Approval authority and duration. Distributing agencies may review and approve
applications submitted by disaster organizations for the donation of foods
for use in preparing congregate meals
for disaster victims. Distributing agencies also shall determine the length of
such donations, taking into consideration the magnitude of the situation,
and may extend the duration of such
donations as developing circumstances
dictate. Following approval of a request for donated foods, the distributing agency shall make appropriate
donated foods available from any
source within the State to the disaster
organization(s) and within 24 hours of
approving the application shall report
the information listed in paragraph
(b)(2) of this section to the appropriate
FNSRO.
(2) Applications. (i) Disaster organizations wishing to receive donated foods
for use in preparing meals for disaster
victims shall submit applications to
the distributing agency. Applications
shall, to the extent possible, include
the following information:
(A) Description of disaster situation;
(B) Number of people requiring
meals;
(C) Period of time for which commodities are requested; and
(D) Quantity and types of food needed
for congregate meal service.
(ii) In addition, organizations shall
report to the distributing agency the
number and location of sites providing
congregate meal service as such sites
are established.
(c) Household distribution—(1) Approval authority and duration. In instances in which the distributing agency has determined that the distribution of donated foods to households is
appropriate, the distributing agency
shall submit applications requesting
approval for such distributions to the
appropriate FNSRO for submission to
FNS for prior approval. FNS will deter-

mine the length of time such donations
will be made, taking into consideration
the magnitude of the situation, and
may extend the duration of such donations as developing circumstances dictate.
(2) Applications. (i) Disaster organizations wishing to receive and distribute
donated foods to households shall submit applications to the distributing
agency. Applications shall, to the extent possible, include the following information:
(A) Description of disaster situation;
(B) Identification of the specific
area(s) included in the request;
(C) Number of households affected;
(D) Explanation as to why the distribution of commodities to households
is warranted;
(E) Anticipated distribution period;
(F) Method(s) of distribution available;
(G) Quantity and types of food needed
for distribution;
(H) Statement of assurance that simultaneous disaster food stamp benefits and commodity assistance will not
be provided to individual households;
and
(I) Description of the system that
will be implemented to prevent dual
participation.
(ii) In addition, information on the
number and location of sites where
commodities are to be distributed shall
be provided to the distributing agency
as such sites are established.
(3) Collection of household information.
In instances in which the issuance of
disaster food stamp benefits has been
approved, any entity (i.e., Federal,
State, or local) distributing donated
foods to households shall, at a minimum, collect the information listed
below in a format prescribed by the distributing agency. Such information
shall be forwarded to the distributing
agency and maintained by the distributing agency in accordance with the
recordkeeping requirements contained
in this part, except that such information may, at the discretion of the distributing agency, be maintained by the
organization distributing commodities
if such organization is an agency of the
State government.
(i) Name of household member applying for assistance;

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Food and Nutrition Service, USDA

§ 250.70

(ii) Address;
(iii) Number of household members;
and
(iv) Statement signed by the household certifying that the household:
(A) Is in need of food assistance;
(B) Understands that misrepresentation of need, and the sale or exchange
of the donated food, are prohibited and
could result in a fine, imprisonment, or
both;
(C) Is not residing in a shelter which
provides food assistance; and
(D) Is not receiving disaster food
stamp benefits.
(d) Quantities and value of donated
foods. The distributing agency shall
make donated foods available to approved disaster organizations based on
the caseload factor information provided by the disaster organizations.
(e) Types of donated foods authorized
for donation. Disaster organizations
providing food assistance under this
Section are eligible to receive donated
foods under section 416, section 32, section 709, section 4(a), and sections 412
and 413 of the Stafford Act.
(f) Summary report. Within 45 days following termination of the disaster assistance, the distributing agency shall
provide a summary report to the appropriate FNSRO using Form FNS–292,
Report of Coupon Issuance and Commodity Distribution for Disaster Relief.
(g) Replacement. Distributing agencies which decide to seek replacement
of foods used from State and/or local
inventories for disaster assistance shall
file their request in writing to the
FNSRO within 30 days following termination of the assistance. FNS will replace such foods in instances when a
request for replacement is submitted
within the required 30 days or sufficient justification exists to waive the
30-day requirement.

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[62 FR 8365, Feb. 25, 1997. Redesignated at 73
FR 46185, Aug. 8, 2008]

§ 250.70 Food assistance in situations
of distress.
(a) Organizational eligibility. In situations of distress in which needs for food
assistance cannot be met under other
provisions of this Part, organizations
(including agencies of State and Federal government) may be eligible to re-

ceive donated foods for congregate
meal service or household distribution
to victims of the situation of distress.
Applications submitted to the distributing agency for the receipt and distribution of donated foods in accordance with paragraphs (b)(2) and (c)(2) of
this section shall be initially submitted in writing if circumstances permit and, if not, confirmed in writing in
a timely manner. Both the applications
and the written approval for the use of
USDA commodities shall be maintained in accordance with the recordkeeping requirements of this Part.
(b) Congregate meal service—(1) Approval authority and duration. Distributing agencies may review and approve
applications for the donation of foods
for use in preparing congregate meals
for a period not to exceed 30 days for
victims of situations of distress in instances in which the need for such assistance meets the conditions of paragraph (a) of the definition of situation
of distress in § 250.3. Following approval
of a request, distributing agencies shall
report the information listed in paragraph (b)(2) of this section to the appropriate FNSRO within 24 hours. In
instances when the distributing agency
extends the originally approved distribution period from less than 30 days
to the 30-day limit, it shall notify the
FNSRO of such extensions. Distributing agencies shall request approval
from FNS, via the appropriate FNSRO,
for donations to exceed 30 days. Upon
determining that there is a need for
the donation of foods for congregate
meals in instances other than those
that meet the criteria in paragraph (a)
of the definition of situation of distress
in § 250.3, the distributing agency shall
forward applications to the appropriate
FNSRO for submission to FNS for prior
approval. FNS will determine the duration of such donations, taking into
consideration the magnitude of the situation. Determinations as to the
length of donations may be revised as
developing circumstances dictate.
(2) Applications. (i) Organizations
wishing to receive donated foods for
use in preparing meals shall submit applications to the distributing agency.
Applications shall, to the extent possible, include the following information:

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§ 250.70

7 CFR Ch. II (1–1–09 Edition)

(A) Description of the situation of
distress;
(B) Number of people requiring meals
and congregate meal service period;
and
(C) Quantity and types of food needed.
(ii) In addition, information on the
number and location of sites providing
meals shall be submitted to the distributing agency as such sites are established.
(c) Household distribution.—(1) Approval authority and duration. In instances in which the distributing agency has determined that the distribution of donated foods to households is
appropriate, the distributing agency
shall submit applications requesting
approval for such distributions to the
appropriate FNSRO for submission to
FNS for approval. FNS will determine
the duration of the donations, taking
into consideration the magnitude of
the situation. Such determinations
may be revised as developing circumstances dictate.
(2) Applications. (i) Organizations
wishing to receive and distribute donated foods to households shall submit
applications to the distributing agency. Applications shall, to the extent
possible, include the following information:
(A) Description of the situation of
distress;
(B) Explanation as to why the distribution of commodities to households
is warranted;
(C) Identification of the specific
area(s) included in the request;
(D) Anticipated distribution period;
(E) Number of households expected to
participate;
(F) Quantity and types of food needed
for distribution;
(G) Statement of assurance that simultaneous disaster food stamp benefits and commodity assistance will not
be provided to individual households;
and
(H) Description of the system that
will be implemented to prevent dual
participation.
(ii) In addition, information on the
number and location of sites shall be
provided to the distributing agency as
such sites are established.

(3) Collection of household information.
In a format prescribed by the distributing agency, any entity (i.e., Federal,
State, or local) distributing donated
foods to households in an area where
the issuance of disaster food stamp
benefits has been approved shall, at a
minimum, collect the information listed below. Such information shall be
forwarded to the distributing agency
and maintained by the distributing
agency in accordance with the recordkeeping requirements contained in this
part, except that such information
may, at the discretion of the distributing agency, be maintained by the organization distributing commodities if
such organization is an agency of the
State government.
(i) Name of household member applying for assistance;
(ii) Address;
(iii) Number of household members;
and
(iv) Statement signed by the household certifying that the household:
(A) Is in need of food assistance;
(B) Understands that misrepresentation of need, and the sale or exchange
of the donated food are prohibited and
could result in a fine, imprisonment, or
both;
(C) Is not residing in a shelter which
provides food assistance; and
(D) Is not receiving disaster food
stamp benefits.
(d) Quantities and value of donated
foods. The distributing agency shall
make donated foods available to eligible organizations based on the caseload
factor information provided by the organizations.
(e) Types of donated foods authorized
for donation. Organizations providing
food assistance in situations of distress
are eligible to receive donated foods
under section 416, section 32, section
709, and section 4(a).
(f) Summary report. Within 45 days following termination of the assistance,
the distributing agency shall provide a
summary report to the appropriate
FNSRO using Form FNS–292, Report of
Coupon Issuance and Commodity Distribution for Disaster Relief.
(g) Replacement. Distributing agencies which decide to seek replacement
of foods used from State and/or local
inventories for situations of distress

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Food and Nutrition Service, USDA

§ 251.2

shall file their request in writing to the
FNSRO within 30 days following termination of the assistance. FNS will replace such foods to the extent that
foods are available.
[62 FR 8366, Feb. 25, 1997. Redesignated at 73
FR 46185, Aug. 8, 2008]

PART 251—THE EMERGENCY FOOD
ASSISTANCE PROGRAM
Sec.
251.1 General purpose and scope.
251.2 Administration.
251.3 Definitions.
251.4 Availability of commodities.
251.5 Eligibility determinations.
251.6 Distribution plan.
251.7 Formula adjustments.
251.8 Payment of funds for administrative
costs.
251.9 Matching of funds.
251.10 Miscellaneous provisions.
AUTHORITY: 7 U.S.C. 7501–7516.
SOURCE: 51 FR 12823, Apr. 16, 1986, unless
otherwise noted.

§ 251.1 General purpose and scope.
This part announces the policies and
prescribes the regulations necessary to
carry out certain provisions of the
Emergency Food Assistance Act of
1983, (7 U.S.C. 612c note).

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[51 FR 12823, Apr. 16, 1986, as amended at 64
FR 72902, Dec. 29, 1999]

§ 251.2 Administration.
(a) Food and Nutrition Service. Within
the United States Department of Agriculture (the ‘‘Department’’), the Food
and Nutrition Service (FNS) shall have
responsibility for the distribution of
food commodities and allocation of
funds under the part.
(b) State AgenciesWithin the States,
distribution to eligible recipient agencies and receipt of payments for storage and distribution shall be the responsibility of the State agency which
has: (1) Been designated for such responsibility by the Governor or other
appropriate State executive authority;
and (2) entered into an agreement with
the Department for such distribution
and receipt in accordance with paragraph (c) of this section.
(c) Agreements—(1) Agreements between
Department and States. Each State
agency that distributes donated foods

to eligible recipient agencies or receives payments for storage and distribution costs in accordance with
§ 251.8 must perform those functions
pursuant to an agreement entered into
with the Department. This agreement
will be considered permanent, with
amendments initiated by State agencies, or submitted by them at the Department’s request, all of which will be
subject to approval by the Department.
(2) Agreements between State agencies
and eligible recipient agencies, and between eligible recipient agencies. Prior to
making donated foods or administrative funds available, State agencies
must enter into a written agreement
with eligible recipient agencies to
which they plan to distribute donated
foods and/or administrative funds.
State agencies must ensure that eligible recipient agencies in turn enter
into a written agreement with any eligible recipient agencies to which they
plan to distribute donated foods and/or
administrative funds before donated
foods or administrative funds are
transferred between any two eligible
recipient agencies. All agreements entered into must contain the information specified in paragraph (d) of this
section, and be considered permanent,
with amendments to be made as necessary, except that agreements must
specify that they may be terminated
by either party upon 30 days’ written
notice. State agencies must ensure
that eligible recipient agencies provide, on a timely basis, by amendment
to the agreement, or other written documents incorporated into the agreement by reference if permitted under
paragraph (d) of this section, any information on changes in program administration, including any changes resulting from amendments to Federal regulations or policy.
(d) Contents of agreements between
State agencies and eligible recipient agencies and between eligible recipient agencies. (1) Agreements between State
agencies and eligible recipient agencies
and between eligible recipient agencies
must provide:
(i) That eligible recipient agencies
agree to operate the program in accordance with the requirements of this
part, and, as applicable, part 250 of this
chapter; and

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